Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

LONDON COUNTY COUNCIL (IMPROVEMENTS) BILL

LONDON TRANSPORT BILL

Read the Third time and passed.

Oral Answers to Questions — TRADE AND COMMERCE

Ayr and Prestwick

Sir T. Moore: asked the President of the Board of Trade if he will designate the burghs of Ayr and Prestwick as a development district.

The Parliamentary Secretary to the Board of Trade (Mr. David Price): No, Sir.

Sir T. Moore: In view of that somewhat unsatisfactory reply by my hon. Friend, could he say exactly what degree of need or unemployment in an area must justify its being declared a development district?

Mr. Price: As my hon. Friend knows, as a result of correspondence which we have had, there is no fixed statistical level of unemployment which qualifies an area for inclusion in the list of development districts. We have to look at both the current level of unemployment and its likely persistency, and we also have to take into account the general incidence of unemployment over the country as a whole.

Mr. Emrys Hughes: Has the Minister no sympathy whatever with his hon. Friend the Member for Ayr (Sir T. Moore)? Is he aware that at the last election his hon. Friend prophesied full-

time employment under a Conservative Government and that this is the worst forecast that has ever appeared in Old Moore's Almanack?

Mr. Ross: If the Minister is not prepared to consider these two worthy burghs in isolation, will he not give part of Scotland at least the benefit of new thinking in relation to a wider area and consider scheduling the whole of Ayrshire, which would not only meet the needs of the two burghs concerned, but would meet the demands of the Scottish Council that we should think also in terms of growth points?

Mr. Price: I cannot give an undertaking to schedule the whole of Ayrshire, but I certainly undertake to my hon. Friend and to the hon. Member that we will keep these matters under very close review.

Wigan

Mr. Fitch: asked the President of the Board of Trade what plans he has for bringing new industries to Wigan.

Mr. D. Price: My right hon. Friend is prepared to give sympathetic consideration to proposals for local expansions in Wigan or new projects which could not reasonably be expected to move to one of the development districts listed under the Local Employment Act.

Mr. Fitch: Can the Parliamentary Secretary be more specific? What he has said is very nice, but it does not mean very much. Can he give more details? What has he in mind for Wigan?

Mr. Price: I regret that I cannot be more specific. The hon. Member knows the general position that we are not prepared to designate Wigan as a development district. We are prepared to do what we can to assist local expansion—the hon. Member and I know of one or two cases which it is not appropriate to discuss in public—and secondly, there are firms who cannot go to development districts but whom we are anxious should go to places like Wigan.

Textile Machinery (Re-equipment Schemes)

Mr. Mapp: asked the President of the Board of Trade the estimated total cost of new machinery in respect of the cotton re-equipment schemes, and the cost and


grant, separately, of machinery installed at the latest available date; and if he will estimate the extent of new machinery, to be installed before the time limit expires.

Mr. D. Price: Up to 1st May, 1963, a total of £5 million was paid as re-equipment grant, being 25 per cent. of total eligible expenditure by the industry of £20 million. This included expenditure on the installation of new machinery and the modernisation of existing machinery. I regret that it is not possible to make the other estimates requested by the hon. Member.

Mr. Mapp: Is the Parliamentary Secretary aware that those figures fall substantially below the expectations of the Government when the scheme was started? Is it not true that the figures indicate conclusively the complete lack of confidence in Lancashire arising from the Government's policy of allowing an overflow of imports? Is it not about time that the Government looked again at the situation and at least arrested some of the haemorrhage and the damage which is being done to the industry?

Mr. Price: I do not think the hon. Gentleman is entitled to draw the conclusions that he has done from these figures. Grants under the Act are not eligible for payment until a firm has completed its work, paid its bills and has satisfied the Cotton Board that the necessary conditions have been complied with. To say that the £5 million is a long way behind the forecast does not give a fair picture. The original total estimate given was £30 million, including the closure element. Scrapping took £11£8 million of that, and it remains to be seen whether the final figure comes up to the original estimate. Imports are another matter. If the hon. Gentleman would like to put down a question, I am sure that my hon. Friend the Minister of State will try to answer it.

Mr. Mapp: Is not the hon. Gentleman misleading the House? Is it not the case that in July last it was anticipated that over £100 million of orders would be firmly placed but that in the ten months that have elapsed only about £30 million has been invested? So is he not being too optimistic in his expectancy for the next two months? Does

not this situation prove lack of confidence in Government policy?

Mr. Mapp: asked the President of the Board of Trade if he will state the total amount of Government grant at the latest available date for installed new textile machinery under the re-equipment scheme and which is now out of use due to the firms closing down.

Mr. D. Price: Precise details are not available. The best estimate which the Cotton Board can make from the information they have is that the figure is about £10,000.

Mr. Mapp: Is the hon. Gentleman aware that the President of the Spinners' and Doublers' Association has referred to a number of mills which have had equipment grants but have now gone out of business due to lack of orders? Is he further aware that under the scrapping scheme adventurers came back into the industry with public money? The second phase of this scheme shows the lack of confidence in the industry. Will the hon. Gentleman do something constructive about it?

Carpets

Mr. K. Lewis: asked the President of the Board of Trade whether, arising out of the recommendation of the Molony Committee on Consumer Protection that, pending the establishment of a grading system for carpets, all carpets should be labelled stating the weave, fibre content, &c., he will indicate what action it is proposed should be taken.

Mr. D. Price: My right hon. Friend is still considering this recommendation in the light of comments which he has received from interested bodies.

Mr. Lewis: Is my hon. Friend aware that he has been considering this too long and that it is time something was done? There is a great deal of consumer discontent on this matter. Is he aware that carpets are still being sold under the old utility label of Grade A, which is quite meaningless today? There are grades above that, but people think they are buying a genuinely Grade A carpet, although they are buying something which is probably nearer to Grade B or Grade C? This is quite disgraceful, and it


should be looked at from the point of view of consumer protection.

Mr. Price: That is exactly the angle from which it is being looked at. When one considers imposing additional legal obligations, these things cannot be done very quickly. It is necessary to study them carefully. A draft British Standard dealing with the labelling of carpets of all types is in the final stages of preparation and covers most of the elements—except that of construction—recommended by the Molony Committee. This goes a long way towards meeting the Molony Committee's recommendations.

Strategic Goods (Export Control)

Mr. Frank Allaun: asked the President of the Board or Trade, in addition to the list of goods subject to embargo for the state trading countries which is placed before Parliament from time to time, what recommendations or guidance he receives concerning British exports to these destinations of items not covered by the Export of Goods (Control) Order and the Strategic Goods (Control) Order.

The Minister of State, Board of Trade (Mr. Alan Green): My right hon. Friend receives advice about exports to the state trading countries from many quarters. The only goods subject to export control are those listed in the Export of Goods (Control) Order and in the Strategic Goods (Control) Order.

Mr. Allaun: Is the list placed before Parliament definitive and complete? As steel pipes are not on the list, is the hon. Gentleman fully supporting the South Durham Steel Company in its efforts to acquire an important order?

Mr. Green: I gave a reply on 28th March on the export of steel pipes. The position has not altered. I have already said that goods subject to export control are listed in the Export of Goods (Control) Order and the Strategic Goods (Control) Order. Perhaps the hon. Gentleman would care to look them up.

Export Credits

Mr. Loughlin: asked the President of the Board of Trade if he is aware that small British firms are at a disadvantage with their foreign competitors in the export market arising from a lack

of credit facilities; if he will examine this matter; and if he will make a statement.

Mr. A. Lewis: asked the President of the Board of Trade what action he has taken or intends to take to ensure that credit facilities are made available to small firms to enable them to tender for large export orders.

Mr. Green: My right hon. Friend is satisfied that the credit facilities available to small British firms compare well with foreign facilities, and can enable credit-worthy firms to undertake any export orders within their capacity.

Mr. Lewis: Will the hon. Gentleman look at the case, details of which have been sent to his Department, in which a British firm with capital assets of £10,000 earned a £250,000 export order but could not get the banks to give credit or the Export Credits Guarantee Department to underwrite it and, therefore, lost the order to West Germany. All the continental countries are able to give, and do give, these credit facilities. Will he look into this matter again? The papers are in his Department. Neither his Department nor the Treasury were able to do anything to help this firm.

Mr. Green: I am aware of the case. The hon. Member must draw a distinction between the ability of a company to trade within its own resources or to use the normal banking facilities to increase capital assets with which to do more trade than it is already doing and the actual extension of State credit facilities. There is no evidence in my possession which suggests that State facilities in foreign countries, as opposed to banking facilities, are better than or even as good as the State facilities provided here.

The Earl of Dalkeith: When considering this Question, will my hon. Friend bear in mind that the increase in postal charges on parcels is discouraging certain small firms from continuing with exports and that it is just possible that a review of or assistance with credit facilities may tip the scales in favour of their continuing to export?

Mr. Green: Questions about postal charges should be addressed to my right hon. Friend the Postmaster-General, but I am sure my noble Friend would agree that we should not subsidise such things.

Mr. Lewis: On a point of order, Mr. Speaker. In view of the unsatisfactory nature of the reply, I beg to give notice that I shall seek to raise this matter on the Adjournment or try to get into the debate next week.

North-East

Mr. Grey: asked the President of the Board of Trade whether he will state, in respect of the North-East for the year ended 31st March, 1963, the number of industrial development certificates issued, the area covered by them, and the estimated additional employment resulting from them.

Mr. D. Price: Eighty-five industrial development certificates were issued, with a total area of 2·5 million square feet, and an estimated employment of 6,300.

Mr. Grey: Is the hon. Gentleman aware that that reply is totally unsatisfactory. How does this compare with the rest of the country in terms of these services? Is he aware that there is still 5·1 per cent. unemployment in the North-East region? The figure he has quoted is totally inadequate.

Mr. Price: I recognise that the figures of unemployment in the North-East are high. However, over the year in question, the total working population of the North-East represented one-twentieth of the working population of the country as a whole and the new jobs arising from the issue of industrial development certificates in the North-East represented one-tenth of the new jobs created through these certificates in the country as a whole. If the hon. Gentleman follows that up with arithmetic, he will see that the North-East got twice as many jobs proportionately as did the remainder of the country.

Mr. Grey: I beg to give notice that shall raise this matter on the Adjournment at the earliest possible moment.

Seaton Delaval and Blyth

Mr. Milne: asked the President of the Board of Trade what has been the number of requests received for development grants since Seaton Delaval and Blyth were scheduled as development districts; how many have been granted; and what are the sums involved.

Mr. D. Price: Five firm applications have been received for financial assist-

ance for projects in Seaton Delaval and Blyth, but only one of these has included a request for a grant: this case is at present under consideration.

Mr. Milne: Is the Parliamentary Secretary aware that this news is rather disturbing? The efforts of his Department were recently described as having got off to a good start, but will he appreciate that a good start after twelve years of Conservative rule in Britain is not good enough and that we want more than a good start? Will he let us have something tangible in the very near future?

Mr. Price: Leaving out the political overtones of that supplementary question, I think that we are off to a very good start. As the hon. Gentleman knows, the Board of Trade is building one advance factory in Seaton Delaval and other in Blyth. That seems to be substantial evidence that we mean what we say.

Consumer Council (Travel Agents)

Mr. Milne: asked the President of the Board of Trade if the functions of the newly-appointed Consumer Council will extend to dealing with travel agents.

Mr. D. Price: The Committee on Consumer Protection recommended that the Consumer Council should confine itself to those services which are linked with the supply or treatment of goods. The Council's terms of reference require them to have regard to the views expressed by the Committee. My right hon. Friend would not, therefore, expect the Council to consider the activities of travel agents.

Mr. Milne: Is the Parliamentary Secretary aware that this leaves rather a wide gap in consumer protection? In view of the liquidations and take-overs which have taken place in this trade over the last twelve months, will ILT, ask the President of the Board of Trade to look very closely at this matter with a view to extending the activities of the Consumer Council?

Mr. Price: My right hon. Friend has an open mind on this issue, but he feels that the Consumer Council has a lot of things to deal with in relation to goods.


However, if the Council represents to him that it wishes to look into the matter which the hon. Member has raised, he will certainly consider widening the terms of reference.

Mr. Mitchison: Is not this an industry in which there has been a bit of trouble with people going out on holiday and finding the facilities they contracted for were not there? Is not the number of travel agents increasing almost as rapidly as the number of betting shops? Would not the hon. Gentleman consider looking at this matter on his own, getting his Department to look at it, to see whether anything can be done to protect tourists before the Summer comes on?

Mr. Price: The hon. and learned Gentleman will not be surprised to know that I have looked at this. I can tell the House that the Association of British Travel Agents, to which the majority and certainly the more reputable travel agents belong, is very conscious of these matters and has a pretty strict code of standards, probably stricter than Parliament would ever enforce by Statute. It follows from that that if people want to be secure when doing business with a travel agent they know that members of the Association are strictly policed. Equally, there are travel agents not in the Association who are highly reputable and who honour their contracts.

Mr. Robert Cooke: Will my hon. Friend bear in mind that this question of bad services to the public is just as important as that of the public being swindled by bad goods being provided? Will he keep his mind open and try to say something about it in the debate on Monday?

Mr. Price: I have an open mind, but it is very much harder to get precise information on matters like these than when one is dealing with goods, which can be much more precisely defined. The Molony Committee had a good deal to say about this matter, and I commend its Report to my hon. Friend. I have an open mind, as my right hon. Friend has, to all suggestions about how services could be better covered.

Commonwealth and G.A.T.T. Countries

Mr. Biggs-Davison: asked the President of the Board of Trade what con-

sideration has been given to, and consultation with other Commonwealth countries initiated on, the proposals sent him by the honourable Member for Chigwell for amendments to the General Agreement on Tariffs and Trade designed to free and foster trade within the Commonwealth and to reduce tariffs within this and other groups of nations; and whether he will make a statement.

Mr. Green: I would refer my hon. Friend to the communiqué which was issued after the meeting of the Commonwealth Trade Ministers on 14th May.

Mr. Biggs-Davison: Is my hon. Friend aware that that communiqué and conference disappointed many of us very much? Is not some modification of the "no new preference" provisions of the G.A.T.T. as suggested, for example, in these proposals prepared by the Commonwealth Industries Association, necessary if Commonwealth preferences, now in danger of being further squeezed by the Kennedy Round, are to be brought into line with the requirements of the modem Commonwealth—or have the Government decided to do away with it altogether?

Mr. Green: We conferred with our Commonwealth friends about methods of improving their relative position within expanding world trade. The expansion of world trade is surely as much in the interests of the Commonwealth countries as it is in ours or those of any other country.

Mr. Fell: Will my hon. Friend tell me why we have committed ourselves in advance of the discussion to a slavish support for the Americans' view of what they want on the Kennedy Round of negotiations?

Mr. Green: My hon. Friend has used rather imaginative terms in describing Her Majesty's Government's attitude towards the Kennedy Round. The Kennedy Round is part of a discussion within G.A.T.T., and the American representatives come to that round armed with more powers for reductions of their own tariffs than had previously been the case. We have welcomed this. We are not slavishly committed to any particular thing within G.A.T.T.

Coal Mine Closures, Blaydon

Mr. Woof: asked the President of the Board of Trade what information he has been given by the National Coal Board regarding forthcoming closures of coal mines in the Blaydon area.

Mr. D. Price: The National Coal Board has informed my right hon. Friend that the High Marley Hill, Stanley Burn and Stargate collieries in the Blaydon area are scheduled for closure during 1963.

Mr. Woof: Is the Parliamentary Secretary aware that these forthcoming closures will make a total of twelve coal mines, two large coking plants and other industrial establishments to be closed in the area? Is he further aware that the mobility of labour is becoming much more difficult because mechanisation is leading to cuts in manpower? Would he not agree to the need for immediate measures to offset these serious dislocations? Can he say what long-term plans there are for industrial development in so far as it affects unemployment in the area?

Mr. Price: We understand from the National Coal Board that about 395 men are likely to be involved in the three closures which I have mentioned. The Coal Board has said that it is not yet possible to say precisely how many of these can be redeployed to replace natural wastage in neighbouring pits, but that it is unlikely that more than about half the men involved in the closures at Stanley Burn and Stargate can be placed locally. As the hon. Gentleman knows, the Coal Board tries to redeploy men in other parts of the Durham coalfield. We naturally realise that this makes the need to get more industry into the Blaydon area greater, and the hon. Member knows that we are doing the best we can. He may like to know that Blaydon was made a development district in July, 1962, and that since then more than £500,000 has been offered in assistance to firms to go there.

Development Districts

Mr. W. Hamilton: asked the President of the Board of Trade how many representatives of firms likely to expand he has met in the course of the last month; and how many firms have com-

mined themselves to expand in development districts as a result of these discussions.

Mr. D. Price: As a result of my right hon. Friend's invitations to the chairmen of companies with growth prospects, twelve meetings have been held since the end of April, and others have been arranged over the next few months. It is too early to expect these discussions to have led to firm decisions to undertake projects in the development districts.

Mr. Hamilton: Is the hon. Gentleman aware that the President of the Board of Trade left the impression in his Budget speech that he personally would be meeting the representatives of these firms? Is it the case that officials of his Department are meeting them, not the right hon. Gentleman? Can the hon. Gentleman impress on the right hon. Gentleman the need for urgency in this matter, for young people are getting out of the development districts as quickly as they can because of the apparent lack of progress?

Mr. Price: The hon. Gentleman will appreciate that, in the last three weeks particularly, my right hon. Friend has been away on very important commercial conferences. It has not been unreasonable, therefore, that his junior Ministers and senior officials should have seen some of these chairmen, for the very reason which the hon. Member mentioned—that we want to get a move on.

Sir H. Harrison: Is my hon. Friend aware that the big concessions announced in the Budget are not as generally well known as he might think, particularly by some of the smaller firms? Will he take all possible steps to advertise these concessions?

Mr. Price: Yes, Sir.

Fife

Mr. W. Hamilton: asked the President of the Board of Trade how many new jobs have been created in the development districts in Fife as a direct result of the operation of the Local Employment Act; and to what extent the creation of these new jobs has been offset by the loss of existing job opportunities.

Mr. D. Price: Of the 2,000 jobs estimated to arise from projects in Fife for


which assistance has been offered under the Act about 450 have already arisen. I cannot say how many existing jobs have been lost, but I understand that about 2,000 redundancies have been notified to the Ministry of Labour since April, 1960.

Mr. Hamilton: Does not the hon. Gentleman recognise that what is happening in Fife is happening in other parts of Scotland, and, indeed, in other parts of the United Kingdom, where people are dependent on declining basic industries? Is he aware that the measures which the Government introduced in 1960 were blatantly inadequate? Can he give us any hope, even with the newly announced incentives, that the number of new jobs provided will be greater than the increasing number of redundancies which are occurring?

Mr. Price: I would not be rash enough to try to forecast precisely how this would work out in any development district, but we very much hope that the results of the improved benefits will be as the hon. Gentleman wants.

Bagpipes

Mr. Dempsey: asked the President of the Board of Trade what was the total value of bagpipes imported into the United Kingdom in the last three years: and what were the countries of origin.

Mr. Green: Imports of bagpipes are not separately distinguished in the trade statistics.

Mr. Dempsey: Is the Minister aware that one would expect more wind in his reply that that? Would not it be fair, with an instrument of this nature, to make a separate record to indicate the way in which foreign competition is affecting industries in Scotland which manufacture bagpipes? In view of the state of the Scottish economy, should not the Board of Trade do everything in its power to encourage the production and manufacture of these instruments in Scotland?

Mr. Green: I would be the last person to decry the importance of the manufacture of these musical instruments to Scotland. If a request were made by the industry for a separate heading, this would be considered, but it is very unlikely that the scope of the trade would

be sufficient to warrant this. Perhaps the hon. Gentleman would care to bear in mind that musical instruments are one of the very few categories of goods which are dutiable when imported from the Preference Area, so in fact these instruments have some form of tariff protection if imported from the Commonwealth.

Carlisle Road, Airdrie (Industrial Estate)

Mr. Dempsey: asked the President of the Board of Trade if he will establish an industrial estate adjacent to the Carlisle Road, Airdrie, in view of the consistently high unemployment rate in the area and the suitability of the site.

Mr. D. Price: I have nothing to add to my reply to the hon. Member of 10th May.

Mr. Dempsey: Is the Minister aware that quite recently it was reported that 9·2 per cent. of the insurable population were unemployed in this large locality? Does the Minister realise that it is difficult to induce private enterprise to build factories, and that one of the ways of achieving our objective would be to lay out an estate and provide factories at reasonable rent which could give the area an opportunity of breaking the back of the consistently high level of unemployment there?

Mr. Price: The hon. Gentleman knows from my reply on 10th May that we are to build a new industrial estate in North Lanarkshire, and we shall announce as soon as possible precisely where that estate is to be located.

Newspapers and Periodicals (Exports to Canada)

Mr. Lubbock: asked the President of the Board of Trade what is the value of exports of newspapers and periodicals to Canada in the most recent year for which figures are available.

Mr. Green: In 1962 exports of newspapers and periodicals to Canada as recorded in the Trade and Navigation accounts were valued at £40,830. This figure does not include the exports by post for which details are not available.

Mr. Lubbock: Does not the hon. Gentleman agree that this valuable source


of foreign exchange is likely to be completely dried up by the imposition by the Postmaster-General of a 1,200 per cent. increase in postal charges? Can the Minister say whether any representations have been received on this subject, and, if so, what reply has been made to them?

Mr. Green: The whole matter has been carefully considered, but the hon. Gentleman will appreciate that the Canadian Magazine Post, which was unchanged since 1907, allowed for specially low rates applicable only to Canada for articles of this kind. This is now going to be changed, and the postal rates applicable to Canada will be the same as those applicable to other overseas countries, and so it will not be absolutely unfair in our exchange with Canada. In addition, I am sure the hon. Gentleman appreciates that the special rates were costing £280,000 a year of public money, and I do not suppose that he really approves of that.

Mr. Lubbock: Have not the agents who import these newspapers and periodicals consented to pay the full cost, and is it not greatly less than the ls.0½d per lb. which the Postmaster-General is proposing to charge?

Mr. Green: If I have notice of tint detail I shall look into it and let the hon. Gentleman know, but I cannot give the answer out of my head.

Brandon and Byshottles

Mr. Ainsley: asked the President of the Board of Trade if he will add the Brandon and Byshottles Urban District Council to the list of development areas, in view of the continued contraction of the mining industry.

Mr. D. Price: My right hon. Friend would not be justified in adding the Durham Employment Exchange Area (of which Brandon and Byshottles form part) to the list of development districts, since the rate of unemployment there is well below that prevailing in development districts. But he is aware of the importance of coal mining in these places and will continue to watch the position.

Mr. Ainsley: The hon. Gentleman will be aware of visiting the neighbouring urban district on the occasion of the inauguration of an advance factory

there. This urban district is contiguous, almost identical in size and population and is dependent on what were mining industries. Its only sin is that it does not come into the same employment exchange area. If it is unrealistic to deal only with parts of the Tyneside area, can the Parliamentary Secretary tell me why it is realistic to deal differently with two urban districts which are affected by the same problems? One has been scheduled as a development district since the Local Employment Act came into force, but the other has not been so dealt with.

Mr. Price: As regards the hon. Gentleman's point about the employment exchange area, over the last year the unemployment figure has been very much lower there than in any of the surrounding development districts. There are at present more jobs in prospect in Durham Employment Exchange area than the total number registered as unemployed. I would be very happy to let the hon. Gentleman have the figures.

Mr. Ainsley: In view of the unsatisfactory nature of that reply, I beg to give notice that I shall raise this matter on the Adjournment at the earliest opportunity.

Computers

Mr. Dalyell: asked the President of the Board of Trade what was the value of computers imported into the United Kingdom in each of the last five years.

Mr. Green: Imports of computers are not separately distinguished in the trade statistics.

Mr. Dalyell: Why not?

Mr. Green: They are a relatively new item. We are considering whether they should be included in the 1964 circulation list.

South Yorkshire (Minister's Visit)

Mr. Jeger: asked the President of the Board of Trade whether he will make a statement on the official visit to South Yorkshire of the Minister of State.

Mr. Green: Yes, Sir. My two-day visit to South Yorkshire this week was


one of a number of export promotion visits which I am making to manufacturing centres throughout the country. These visits are a continuation of those made by my predecessor early last year and provide opportunities to meet, in their own offices and workshops or at informal gatherings, as many as possible of those who are already engaged in exports in order to discuss with them their successes, ideas, problems or difficulties.

Mr. Jeger: While thanking the Minister for that comprehensive reply, may I ask whether it is his intention to go to the Port of Goole, which is the only port in the West Riding of Yorkshire and is a natural outlet for exports from Yorkshire to the Continent of Europe? Will he consult the authorities in Goole with a view to increasing exports through the port?

Mr. Green: I know the hon. Gentleman will appreciate that one cannot be everywhere at the same time, but the means of moving goods from factories, whether in Yorkshire or in any other part of the country, through the most convenient ports are amongst the matters discussed with industrialists, and therefore the needs and problems of Goole are in fact discussed even though I have not been there.

Mr. A. Roberts: Is the Minister aware that the public of Yorkshire view this visit with apprehension? Is he further aware that they look on this visit not as a means of increasing exports but as a means of poaching industry out of the county?

Mr. Green: I assure the hon. Gentleman that those suspicions are wholly unfounded. My sole purpose in making the visit is to help to promote exports, and the location of industry or the moving of industry out of Yorkshire has played absolutely no part, and would play no part, in any of my discussions with the constituents of the two hon. Gentlemen who have raised this matter.

South Africa

Mr. Wall: asked the President of the Board of Trade what was the value, respectively, of armaments and of other exports supplied in each of the past five years to the Republic of South Africa;

and what is the expected value of similar exports during the coming year.

Mr. Green: The annual values of our total exports to the Republic of South Africa are obtainable from Account IV of the appropriate December issues of the Trade and Navigation Accounts. It is not our policy to disclose the total value of armaments exported to other countries. As far as total exports to South Africa are concerned, they have been rising in recent months, and we expect them to reach a higher level this year than in recent past years.

Mr. Wall: Is my hon. Friend aware that any cancellations of orders for supersonic naval strike aircraft, which incidentally are wholly unsuitable in terms of security duties, could cause unemployment in east Yorkshire? Would not my hon. Friend agree that the cancellation of orders for political pm-poses is bound to have repercussions on our export trade?

Mr. Green: In general, I agree with my hon. Friend's comment on that, but he will appreciate that if he has a specific question on that point it is a matter for the Foreign Office and not for me.

County Durham

Mr. Shinwell: asked the President of the Board of Trade how many advance factories are in process of building in the County of Durham; how many will be completed in 1963; how many are in contemplation; and what estimate he can give of the number of workpeople who are likely to be employed.

Mr. D. Price: Ten advance factories are being provided in the County of Durham under the present programme. Three of these are already under construction. My right hon. Friend expects that seven will be completed this year and the other three soon afterwards. The 10 factories should provide more than 1,000 jobs.

Mr. Shinwell: When does the hon. Member expect production to begin?

Mr. Price: When the factories are completed and we have tenants for them.

Mr. Shinwell: Is not this all pie in the sky? Is nothing definitely arranged?


Is it not a fact that at the end of the day very few men will be absorbed into employment? Is not that the position? Is this the best that the Government can do? In view of the unsatisfactory nature of that shocking reply, I beg to give notice that I shall raise the matter on the Adjournment.

Mr. Speaker: I do not think that the irregularity of the notice can be successfully concealed in a supplementary question

Wingate and Peterlee

Mr. Shinwell: asked the President of the Board of Trade what industries he is seeking for the Wingate area in County Durham where coal-mining has ceased and is unlikely to be resumed; and what are the prospects of new industries for Peterlee.

Mr. D. Price: Any company is welcome which will provide stable employment for men in the Wingate area. In the last few weeks three companies have decided to establish new projects in Peterlee. These are estimated to provide nearly 200 new jobs.

Mr. Shinwell: Is the hon. Member aware that as a result of the closure of the pit in the Wingate area 600 men have lost their jobs? Does he really believe that the employment of 200 men—when they are actually employed—will make very much difference to that situation?

Mr. Price: I think that it will. It all helps. Furthermore, I know that in recent weeks a number of other companies have been visiting the Peterlee area, and we hope that some, at least, will establish projects there.

Mr. Shinwell: In view of the unsatisfactory nature of that reply, I beg to give notice that I shall raise the matter on the Adjournment.

North Lanarkshire

Miss Herbison: asked the President of the Board of Trade if he is aware that Kingshill No. 2 Colliery is likely to close, that in the same area 14 collieries and mines and a foundry employing 600 men have been closed since 1948, and that there is already heavy unemployment in the Cleland, Newmains, Forth, Carluke

and Wishaw area; and what proposals he has for providing work for the unemployed and those who will become unemployed in this district.

Mr. D. Price: Projects already secured for North Lanarkshire and Shotts are estimated to provide nearly 6,500 new jobs, and my right hon. Friend will continue to encourage new industry in this area. But he cannot undertake to provide employment specifically to replace jobs lost as a result of a particular closure in a particular place. Travel-to-work is a recognised feature of life today.

Miss Herbison: Is the Minister aware that this question does not deal with a particular closure of a particular pit? Is he aware that this area has been the worst-hit area in the whole of Britain from the point of view of loss of jobs owing to declining industries? Is he further aware that this is an area where, according to the county plan, in the next few years there will be a great increase in population? Does he realise that none of the 6,000 jobs about which he talks is situated in this area, and that for many people none of these jobs will be in what could be called a travel-to-work area?

Mr. Price: I do not entirely agree with the hon. Lady in the second part of her supplementary question. I agree with her about the need to bring many more jobs to this area.

Mrs. Hart: Is the hon. Member aware that in considering this part of the County of Lanarkshire it is absurd to talk in terms of travelling to North Lanarkshire for jobs? Is he aware that there has been great neglect of the needs of this part of the county for new jobs, and will he take that fact into account in his considerations?

Mr. Price: I am aware of the problems of people travelling from Forth to Carluke and beyond.

Oral Answers to Questions — NATIONAL FINANCE

Rating Valuation (Wimborne and Cranborne)

Sir Richard Glyn: asked the Chancellor of the Exchequer whether the same valuer was responsible for revaluation for rates in the rural district of Wimborne


and Cranborne, the adjoining county borough of Bournemouth and the rural district of Beaminster; and what directions as to the basis of revaluation were given to the valuer or valuers concerned.

The Chief Secretary to the Treasury (Mr. John Boyd-Carpenter): No, Sir. A different valuation officer was concerned for each area. The basis for the new rating assessments is prescribed by law. No special directions were given to the valuation officers concerned.

Sir Richard Glyn: Is my hon. Friend aware that as a result of the activities of these different valuers the rate burden in the rural district of Wimborne and Cranborne has increased by almost double the increase in the adjoining county borough of Bournemouth, which has many more amenities, whereas in the rural district of Beaminster, which has similar amenities to Wimborne and Cranborne, the rate burden has actually gone down? Is not this a very striking discrepancy? Will not my right hon. Friend ask the Inland Revenue to look into the matter again?

Mr. Boyd-Carpenter: As my hon. Friend the Financial Secretary to the Treasury told my hon. Friend when he brought a deputation to see him and my right hon. Friend the Minister of Housing and Local Government, this question is being looked into. The deputation was quite recent. It submitted a mass of material, and our investigations are not yet completed.

Premium Bonds

Mr. J. Wells: asked the Chancellor of the Exchequer if he will alter the regulations concerning Premium Bonds so that they can be held by a trustee.

The Economic Secretary to the Treasury (Mr. du Cann): No, Sir.

Mr. Wells: Is not my hon. Friend aware that a number of people hold Premium Bonds in a trustee capacity, and that should these trustees—or sham trustees—die, the Premium Bonds are aggregated to those trustees' estates, to the great inconvenience of the charitable or other bodies for whom they have been acting? Will he look into the matter again?

Mr. du Cann: I should point out that the Premium Bonds scheme was introduced with the intention of attracting a new class of small savers. In this it has been extremely successful. The expense of the scheme is justified only on that ground, and it is certainly not designed to appeal to trustees.

Oral Answers to Questions — RURAL TRANSPORT

Mr. Speir: asked the Prime Minister whether he has now been able to give consideration to the case for assisting and improving the public transport services in the rural areas of Great Britain as put to him by the deputation led by the hon. Member for Hexham which he received last December; and whether he will make a statement.

Mr. More: asked the Prime Minister what consideration he has given to the improvement of rural transport, following the deputation which he received last December; and if he will make a statement.

The Prime Minister (Mr. Harold Macmillan): Final decisions on this matter ought to take account of the special studies of rural transport which my right hon. Friend the Minister of Transport has had made. I understand that the full results of these studies are expected by the end of June.

Mr. Speir: While thanking the Prime Minister for the personal interest that he is now taking in this problem, may I ask him whether he realises the intense irritation which exists in rural areas of Britain at the failure of the Government to get a move on on this problem? Does he realise that it is more than eleven years ago since the Conservative Party in its Election Manifesto promised better services. Does my right hon. Friend appreciate that it is more than two years ago since Professor Jack's Committee reported on the role of these services. Does my right hon. Friend realise that the National Association of Parish Councils considers that the surveys to which he has referred are so unnecessary and such a waste of time and money that they are not cooperating on them?

The Prime Minister: The services will be very much improved. It is a question of the cost of them. I regret the delay.


but I hope that it will not now be long before a decision is made.

Mr. More: Have the Government no concern for the increasing difficulties facing the small independent bus operators who have served our country districts so well in years past.

The Prime Minister: Yes. That fact will be borne in mind.

Mr. Hilton: As a member of the deputation that the Prime Minister was good enough to see some time ago, may I ask him whether he is aware that when the Beeching Plan is implemented the already inadequate rural transport services will be worsened? Will he give an assurance that before any railway stations are closed—especially in Norfolk—roads will be improved, so that they are able to carry the increased volume of traffic thrown on to them?

The Prime Minister: It is a question of the profitability of the rural bus services, but I would have thought that if passengers are conveyed only upon the roads, rather than divided between the trains and the roads, it should help the bus services.

Oral Answers to Questions — FOREIGN AGENTS

Mr. Edelman: asked the Prime Minister whether he will introduce legislation requiring any individual or body engaged in promoting for reward the concerns of a foreign State or States to register as a foreign agent.

The Prime Minister: No, Sir.

Mr. Edelman: Does the Prime Minister consider it desirable that Britain's public relations men should receive under-cover subsidies in order to promote the interests of countries which might not coincide with those of Great Britain? In those circumstances, will not he study United States legislation precisely on this subject?

The Prime Minister: No, Sir. I have been informed of the United States decision. Their position is a little different from ours, because, under their system, when Congressional committees are considering legislation they take evidence direct from interested parties, which we do not do. Furthermore, the hon. Mem-

ber will realise that legislation is quite a job to fit into the programme, and I do not think that it is worth while at present.

Oral Answers to Questions — SECURITY SERVICES

Mr. A. Henderson: asked the Prime Minister if he will take the necessary steps to safeguard the British security services from interference, following the recent attempt to disrupt their communications.

Mr. Grimond: asked the Prime Minister if he is satisfied with the security arrangements for intelligence services in view of the disruption caused by telephone calls and unauthorised entry into some of their offices; and if he will make a statement.

Mr. E. Fletcher: asked the Prime Minister if he will make a statement on the blocking of telephone lines at Intelligence headquarters and the unauthorised entry of people into these offices.

The Prime Minister: I am glad to say that reports on this subject have been much exaggerated. Nevertheless, I very much deplore, as I am sure will all responsible people, any attempt, however unsuccessful it may be, to hamper and impede the important and necessary work of our security services. Steps have been taken to minimise the effectiveness of any such attempts.

Mr. Henderson: Can the Prime Minister say, from the information available to him, whether these represent interferences on the part of irresponsible people, as against a serious campaign of subversion and espionage?

The Prime Minister: I do not think that they are very serious. I have been given the information that at the beginning of this month an anonymous caller telephoned one of the buildings used by the security services on about eight occasions. The duration of each call was a few seconds only. The calls were either abusive or obscene. On another occasion there was the story of a reporter who declined to give his name and called at the address and who asked for an interview. These calls were on matters of that order of significance. They were a nuisance rather than a danger.

Mr. Grimond: Can the Prime Minister assist the House by telling hon. Members whether these headquarters are of importance or not? If they are not of importance, one could understand that these calls do not matter. But after the recent revelations about what goes on in the security services of the country I do not think that we ought to be complacent about this. If these headquarters are of importance, should not the right hon. Gentleman assure the House that he is taking effective steps to keep the numbers secret so that even obscene callers do not interfere with the work there?

The Prime Minister: With regard to the second part of what worries the right hon. Gentleman, I will give the most specific assurance. With regard to the first part, it may perhaps be found possible to get over the difficulty by changing the numbers.

Mr. Fletcher: The Prime Minister has said that these reports are exaggerated. Can he tell the House whether it is or is not true that, according to the Guardian, there was an occasion on which the whole of the 40 telephone lines of Military Intelligence were blocked for eight hours, with the result that they could not take incoming or outgoing calls? Will the Prime Minister say whether this happened or not, and, secondly, whether any steps have been taken to prevent that happening in future?

The Prime Minister: What did happen was that over a period of about one and a half hours on eight occasions these calls to which I have just referred were made.

Oral Answers to Questions — HIGH ALTITUDE TESTS

Mr. A. Henderson: asked the Prime Minister whether following the launching of 400 million copper needles into space, he will propose to President Kennedy the establishment of an international agency for controlling such experiments.

Mr. M. Foot: asked the Prime Minister if, following the latest space experiments with filaments of copper conducted by the United States Air Force, he will consult President Kennedy regarding the desirability of establishing international control of experiments of this kind.

The Prime Minister: No, Sir.

Mr. Henderson: In view of the fact that a large number of scientists, including Sir Bernard Lovell, have declared that this experiment contaminates space, is not it something in the nature of the high altitude tests which have been suspended, and is it not likely that unless some form of international control is established these experiments may well be repeated by other countries which are seeking the same objective as the United States?

The Prime Minister: I admit that we brought to the notice of our American friends the dangers that if these were released before it was established that the satellite was in its correct orbit some harmful effects might take place on scientific research. In view of all the other difficulties, I do not feel very confident about being able to get agreement on civil international control.

Mr. M. Foot: Does the right hon. Gentleman's answer mean that the United States Government embarked on this experiment without any consultation with the British Government at all? Does he think that the United States Government have the right to treat the Universe as if it belonged to them—like some Latin-American State? And even if that is the position of the Prime Minister, is the right hon. Gentleman so pusillanimous that he is not even prepared to propose that there should be some international consultation before these experiments are conducted?

The Prime Minister: We are closely informed by the Americans. This experiment has the greatest importance—or it may have the greatest significance—in one of the most important aspects of defence.

Mr. Foot: Will the Prime Minister say whether he was asked by the American Government whether he would agree to the experiment, and when he gave his consent—if he was asked—did he consult British scientists such as Sir Bernard Lovell about it?

The Prime Minister: This experiment was first conducted in October 1961. We were in touch with the United States Government. As I have said, they have agreed that any future experiment will be so arranged that the needles are not


released until the vehicle is in its proper orbit. I have been personally into what is proposed. It is an experiment which, I can assure the House, may be of very great significance in the whole system of the deterrent defence.

Sir H. Legge-Bourke: May I ask whether my right hon. Friend will bear in mind that he will have very considerable support from all the leading scientists in this country and from many hon. Members on both sides of the House if he can use his influence to ensure, so far as possible, that we are not led into a sort of cold war in space involving the distribution of haberdashery all over the universe?

The Prime Minister: Yes, Sir. The next Question on the Order Paper deals with that to some extent. I must tell the House that so long as I have any responsibility I could not object to this particular experiment being made under the best possible conditions, for it is an important one.

Mr. Driberg: asked the Prime Minister if he will now make a statement on the scope and terms of his communication to the United States authorities on the scientific effects of high-altitude tests.

Mr. M. Foot: asked the Prime Minister whether he will make a statement on his recent discussions with British scientists about the effects of high-altitude tests.

Sir H. Legge-Bourke: asked the Prime Minister if he will now make a statement on the effects on scientific research of experiments in space; and what steps he proposes taking in conjunction with appropriate American authorities to control such experiments.

The Prime Minister: My noble Friend the Lord President of the Council and Minister for Science arranged for a panel of experts to consider the scientific effects of high-altitude nuclear tests, and to report to him through the Steering Group on Space Research. Their Report is published today as a White Paper, and copies will be available in the Vote Office. A copy of the text has been sent to the United States Government.

Mr. Driberg: Have the contents of this White Paper been communicated to

the United States authorities and can the right hon. Gentleman say what response there has been from them?

The Prime Minister: The Report has just been concluded and has been sent to them. Regarding the substance of the Report, perhaps the hon. Gentleman would study it. I find myself very unwilling to answer questions "off the cuff" on the rather complicated questions which the hon. Gentleman will see when he reads the Report.

Mr. M. Foot: While I am sure we are grateful to the Prime Minister for the care which he has taken to get this Report produced, does not he think that it would have been better to have had this investigation and Report produced in this House before he gave his approval to these high altitude tests instead of after they have happened?

The Prime Minister: The hon. Gentleman knows the whole of this matter. I was asked to get this Report made. It has been made by a number of scientists, including Sir Bernard Lovell. It is unanimous. Perhaps hon. Members will study it and put down further Questions about it.

Sir H. Legge-Bourke: The whole House will, I am sure, recognise the extraordinary difficulty of the Prime Minister in this matter in view of the fact that this rainbow bomb test was originally a purely American test. Is my right hon. Friend aware that he may rest assured that many people will be deeply grateful for the initiative which he took in arranging for this report? We shall want some time to consider it, but would my right hon. Friend do everything he can to reassure us that before any further tests of this kind take place, the appropriate steps will be taken with the Americans?

The Prime Minister: Yes, Sir. I think that over this matter the American Government are just as anxious as we are to proceed only with what is necessary and to have every regard to the considerations which I know are felt by my hon. Friend and other hon. Members. Therefore, I will undertake to do that. I must add that I am bound to say that the only final satisfactory end would be if we could abolish these tests altogether by all sides.

Oral Answers to Questions — POLARIS SALES AGREEMENT

Mr. Wigg: asked the Prime Minister if steps have now been taken to ensure that the undertaking entered into by the Government under the conditions of paragraph 2 of Article XIV of the Polaris Sales Agreement, Command Paper No. 1995, has been implemented throughout industry, the Armed Services and the Civil Service; and if he will make a statement.

The Prime Minister: Naturally we are taking the measures necessary to fulfil this undertaking.

Mr. Wigg: Will the right hon. Gentleman be good enough to tell the House whether, when the Polaris Sales Agreement was being negotiated, he took fully into account the disparity in practice between what happens in the United States and in this country? Has he taken any steps whatever to consult industry, both sides—employers and the T.U.C.—about what is involved in positive vetting if, on this occasion, the Government are to honour the agreement into which they have entered with the United States?

The Prime Minister: Of course we have gone into this. We are not required to adopt in detail exactly their methods. But our procedures are broadly the same and are known to the Americans. There will be certain cases —very few of them—where there is access to classified information and where special security measures would have to be taken. But those would be taken whether we had an agreement with the Americans or not because it would be the right thing to do.

Mr. H. Wilson: In view of the concern expressed in the debate on the Report of the Radcliffe Tribunal about the inadequacy of positive vetting in the particular case dealt with by the Tribunal, would the right hon. Gentleman say whether there have been requirements in the system of positive vetting arising out of the Radcliffe Report, and secondly, whether they will apply in other cases in relation to Article 14(2) of the Polaris Agreement?

The Prime Minister: I am continually discussing this matter with the security authorities. I understood that the

anxiety of the hon. Member for Dudley (Mr. Wigg) was lest these procedures might be too severe.

Mr. Wigg: Is the Prime Minister aware that he is dodging the issue a little? He said that it will not be the same arrangements in detail. That is not the point. He has in honour committed this country to afford the same measure of protection to the concept of Polaris as is ensured by the United States by their methods. That is what the agreement says. If he will read the paragraph, of which surely he is aware, he will see that it uses the words
the same degree of protection as is afforded by the Government of the United States.
Did he before he undertook that obligation examine and see what the obligation meant? Now he has committed the honour of this country, will he for the first time see that we carry out our obligations?

The Prime Minister: Article 14, subsection (2) reads:
Shall undertake such security measures with the Government of the U.K. as are necessary to afford to classified articles, services and documents substantially the same degree of protection…
The hon. Member did not read it accurately—
as is afforded by the United States.
That is exactly what I said. Our measures are similar although not precisely the same.

Mr. H. Wilson: Emphasising the word "substantially" does not mean that the Prime Minister is suggesting it will not be equal even though it may be different in method? Do we understand from him that, while detailed methods may be different, there will be the same measure of protection by our security vetting system that the Americans have with theirs? Since it is quite clear that there was nothing like that amount in the Vassall case because they did not even have the commonsense to look through his Service record or ask the views of his immediate past Service chiefs in Moscow, will the Prime Minister say whether improvements have been made so that in carrying out this article there will be substantially the same measure of protection?

The Prime Minister: Improvements are continually being made and will be


made. I am glad this exchange has taken place, because we hope to have the support of the House if there are measures which may impose a certain degree of distaste or discomfort on a number of workers in different parts of this undertaking.

BUSINESS OF THE HOUSE

Mr. H. Wilson: May I ask the Leader of the House whether he will state the business of the House for next week?

The Chancellor of the Duchy of Lancaster (Mr. Iain Macleod): Yes, Sir. The business for next week will be as follows:

MONDAY, 20TH MAY—Supply [18th Allotted Day]: Committee, which, if the House agrees, will be taken formally to allow debate on the Opposition Motion on Consumer Protection.

Consideration of Lords Amendments to the Protection of Depositors Bill.

TUESDAY, 21ST MAY—Finance Bill: Further progress in Committee.

Motion on the Pedestrian Controlled Vehicles Regulations.

WEDNESDAY, 22ND MAY—Supply [19th Allotted Day]: Committee.

Debate on Agriculture, which will arise on the appropriate Votes.

Motions on Schemes for the United Kingdom on Grassland Renovation, Ploughing Grants, Winter Keep and Fertilisers.

THURSDAY, 23RD MAY—Finance Bill: Further progress in Committee.

FRIDAY, 24TH MAY—Private Members' Motions.

MONDAY, 27TH MAY—The proposed business will be: Finance Bill: Further progress in Committee.

Mr. H. Wilson: Since the last item which he announced is for the beginning of the week before Whitsun, is the Leader of the House now able to say what the Government's intentions are about the adjournment for the Whitsun Recess?
Is the right hon. Gentleman aware that as soon as we come back after the Recess there will be a very strong desire from this side of the House, and perhaps on the opposite side, too, for a full-dress

debate on foreign affairs and disarmament?

Mr. Macleod: I shall make an announcement about the Recess as soon as I can. We hope that with reasonable progress, particularly with the Finance Bill, the Recess will he two weeks and a weekend—17 or 18 days as the case may be.
I take note of what the Leader of the Opposition has said about the business after we come back. We can, of course, discuss that.

Sir G. Nicholson: On the Order Paper no fewer than nine statutory instruments have been set down for consideration, each of which has the note that it has not yet been considered by the Select Committee on Statutory Instruments. How has that irregularity taken place? Are they all of such urgency that they cannot be first considered by the Committee?

Mr. Macleod: No, Sir. The Committee is meeting on Tuesday, the 21st. This is quite normal, as reference to previous business statements would assure my hon. Friend. If any irregularity were found in them, the business of the House which I have announced would have to be altered, but I am sure that my hon. Friend will find, if he looks it up—and he knows about these matters very well indeed—that this is a normal form of announcement.

Mr. Fletcher: May we take it from what the right hon. Gentleman has said that there is no intention of taking any of these Statutory Instruments until the Select Committee has met on the 21st?

Mr. Macleod: That is so; and if anything were found in them which was unsatisfactory the business would have to be altered accordingly. I am glad to have the opportunity of making that clear.

Mr. Biggs-Davison: Having regard to the Motion on the Order Paper in the name of my right hon. and learned Friend the Member for Hertford (Sir D. Walker-Smith) concerning Commonwealth trade, can my right hon. Friend assure me and the House that we shall have an opportunity of debating the important consequences for this country of the E.F.T.A., Commonwealth and G.A.T.T. conferences?

Mr. Macleod: I cannot give that assurance, but I have announced business up to Monday of the week in which we rise for the Whitsun Recess. Naturally, there are matters which we shall have to take in that week.
As to the point raised by my hon. Friend, I think we ought to wait and see how matters at present being discussed turn out. Then in competition with other claimants, I shall consider his suggestion.

Mr. Shinwell: Since the Leader of the House made his statement yesterday on the proposed legislation on House of Lords reform, no doubt he has had time to reflect on it. Can he therefore now tell the House when the Bill will be presented and when a debate on it will take place?

Mr. Macleod: I can answer the first point fairly precisely, but not the second. It is not a difficult Bill to draft, but there are one or two rather complicated purely drafting matters to give effect to the joint Report of the two Houses and the statement I announced yesterday. I hope—it can be no more—that the appropriate Minister will be able to present the Bill to Parliament before Whitsun if this goes well. If not, it will be immediately afterwards, but I hope before.
I cannot say when we shall debate this matter, but, as I said yesterday, we should like to get the Bill this Session.

Mr. McMaster: In view of the continuing seriously high level of unemployment in Northern Ireland, can my right hon. Friend find an early day, or half a day, to discuss its affairs, as was agreed at the end of the last debate on Northern Ireland?

Mr. Macleod: There will be such an opportunity. The precise timing I must leave for the moment.

Mr. D. Foot: Will the Leader of the House say whether his attention has been drawn to the Motion which appears on the Order Paper today in my name and the names of 100 hon. and right hon. Members drawing attention to policies being pursued by the South African Government and calling upon Her Majesty's Government to propose at the United Nations a general embargo upon the shipment of arms or military equipment?

[That this House condemns the policy of apartheid pursued by the Government of South Africa, the denial of elementary human rights to the great majority of the South African people and the series of enactments whereby the South African Parliament have abrogated the rule of law and transformed the Republic into a police state; further condemns the refusal of the South African Government to accept and act on the opinion of the International Court on South West Africa; and, having regard to the views expressed on 6th November 1962 by the General Assembly of the United Nations, calls upon Her Majesty's Government to propose to the United Nations a general embargo upon the export of arms and military equipment to South Africa.]

In view of the great concern which is felt, particularly over arms shipment to South Africa, among the African members of the Commonwealth, will the right hon. Gentleman arrange for a debate on this matter at an early date?

Mr. Macleod: I have, of course, studied that Motion. Every hon. Member holds views and they do not differ, I dare say, from the views of many hon. Members opposite about the policy of apartheid in South Africa. That is not in dispute. What is in dispute is whether the methods of the Opposition are wise or not—and we think that they are not. I could not undertake to find Government time to debate the Motion.

Mr. H. Wilson: Is the right hon. Gentleman aware that while we all may on our lips express detestation of apartheid, there is all the difference in the world between those who are accessories after the fact and those who are not?

Mr. Speaker: Order. I must administer a reproof to myself and to others. We must confine business questions to business.

Mr. Robert Cooke: Will my right hon. Friend say when he expects to proceed further with the Television Bill? Will he bear in mind that the Thursday before Whitsun will be a most inconvenient day for further consideration of such an important Measure as that?

Mr. Macleod: We shall be bringing the further stages of the Television Bill before the House as soon as is reasonably possible and appropriate. Some


Amendments have been tabled by my right hon. Friend the Postmaster-General. But the Bill is not included in the business which I have announced.
Answering the question which the Leader of the Opposition raised about time to discuss these matters, I shall pay more attention to what he says when I hear him making exactly the same answers in relation to other and Communist countries whose methods we deplore.

Mr. Wilson: Is not the right hon. Gentleman aware that we do not ship arms to Communist countries?Is he further aware—

Mr. Kershaw: On a point of order—

Mr. Speaker: Order. I think that everybody is to blame, probably including myself. We cannot relate this to the business for the ensuing week. As the servant of the House, I am trying to manage the business of the House for it, and I am sure that it is in the common interest to keep the business questions to business, otherwise the discussion ranges too wide.

Mr. Hector Hughes: When will the Government find time for further progress in respect of the Wills Bill, which is much desired?

Mr. Macleod: I am not sure whether the hon. and learned Member is referring to the Bill on intestacy, in which there is a considerable amount of interest. If so, I can tell him that there is a chance that it will be introduced into the House at a very early date.

Mr. Hector Hughes: I was referring to the Bill which is designed to repeal the Wills Act of 1861—a very useful Bill which was introduced last November and opposed by some hon. Members opposite, but which has at last been given a Second Reading and which is now due for the Committee stage. When will he find time for the Committee stage?

Mr. Macleod: I was not clear whether the hon. and learned Member was referring to that Bill or to the Bill on Intestacy, about which I made an earlier answer. I am sorry if I misunderstood him. The Bill to which he now refers

will have to take its turn with all the other Private Members' Bills.

Mr. Grimond: May I pursue the question asked by the hon. and learned Member for Ipswich (Mr. D. Foot) and ask the Leader of the House whether he wishes to correct one impression which he has given? If the House wants to debate a controversial matter, as arms to South Africa certainly is, does he not agree that that is an additional reason for debating it and that as Leader of the House of Commons, and not as joint head of the Conservative Central Office, it is his business to serve the interest of the House and not to make party points?

Mr. Macleod: If there are opportunities which the official Opposition wish to take to debate this matter, they can find them, but in these matters it would be quite wrong to provide Government time for such a Motion as that on the Order Paper.

Sir A. V. Harvey: Is my right hon. Friend aware that a number of hon. Members on this side of the House would like to discuss the whole problem of the export of armaments, including the wisdom of sending military aircraft to countries such as Indonesia?

Mr. W. Hamilton: Will the Leader of the House tell us whether the Government will be making a statement on the suggested rundown in the dockyards, details of which appeared in the Press this morning? Is he aware that there is considerable anger on this side of the House about the way in which this matter has been handled in that the Minister has seen Conservative Members affected, but has not seen hon. Members on this side of the House?
On another point, will he make arrangements for the annual report of the Duchy of Lancaster to be available in the Vote Office? I am informed that that office has never seen it there, although the right hon. Gentleman said that the Treasury presented it to the House.

Mr. Macleod: I will first answer the second of those two slightly unrelated points.
As the hon. Member knows from his inquiries, the Duchy of Lancaster is not


a Government Department and does not have a Parliamentary Vote, but every year the Treasury presents its accounts to Parliament. I will see whether there is any way in which they can be made more conveniently available.
Answering, next, the first part of the hon. Gentleman's supplementary question, there is no intention of making a statement on the matter to which the hon. Member referred within the compass of the business statement which I have announced.

Mr. Emrys Hughes: Does the Leader of the House recollect that several months ago he gave a promise that he would inquire into whether hon. Members who abstain from voting and wish to have their abstentions recorded in HANSARD shall have the right to do so? I do not ask him to make a statement next week, but will he promise to give the matter his early attention?

Mr. Macleod: I have been looking at that and a number of other matters, and I am at the moment in negotiation as to the matters—there are at least a dozen of them—which are possible candidates which might be considered by the Select Committee on Procedure.

Mr. H. Wilson: May I refer to the questions asked by the hon. Member for Chigwell (Mr. Biggs-Davison) and to next week's business? Does the right hon. Gentleman recall that when we debated the position arising out of the break-

down of the Brussels negotiations, on 11th February, the Prime Minister made a great point of the Commonwealth Trade Ministers' conference in May—the conference which was held this week. Will the right hon. Gentleman give an undertaking that we shall have a full statement made to the House on this week's conference as part of next week's business, so that the House could then consider whether we ought to devote some time to debating the whole position of Commonwealth trade?

Mr. Macleod: Without giving a specific undertaking about that, I should like to consult my right hon. Friends most concerned and to put that point to them.

Mr. Willis: When a statement is made about the future of the dockyards, will it be made in the form of a statement to the House and not in answer to a Question which limits the possibility of further questions?

Mr. Macleod: There is no immediate intention of making an announcement in either of those forms, but I will keep that point in mind.

Miss Vickers: In view of that answer, may I ask whether there is any intention to take action about the reports in the Press which appeared before a statement was made?

Mr. Macleod: I do not think that the responsibility for Press reports comes into the question of the business announced for next week.

Orders of the Day — FINANCE BILL

Considered in Committee [Progress 15th May].

[Sir WILLIAM ANSTRUTHER-GRAY in the Chair]

Clause 14.—(ABOLITION OF CHARGE ON OWNER-OCCUPIERS.)

3.49 p.m.

Mr. G. R. Mitchison: I beg to move, in page 12. line 11, at the end to insert:
Provided that in order to limit the effect of this section in the case of an individual who occupies more than one residence, such an occupier in respect of any residence other than his principal residence shall be treated as if he were entitled to rent (hereinafter called "hypothetical rent") and hypothetical rent shall be deemed to be included among the rent; to be charged under the said new Case; so, however, that no person shall pay more tax in consequence of this proviso than he would have paid if this Chapter II had not been enacted.
(2) For the purpose of ascertaining the hypothetical rent of a residence subparagraphs (3) (with the omission of all words after "accordingly") and (4) of paragraph 6 of Schedule 4 to this Act, the provisions of that Schedule relating to deductions and Schedule 7 to this Act shall apply to such individual as aforesaid as they apply to the owner mentioned in the said sub-paragraph (3).
(3) In this section "principal residence" means the residence which the occupier elects (in such manner and at such time as may be prescribed by the Commissioners of Inland Revenue) to have treated as his principal residence or which, failing such election, has the highest annual value among his residences, or, where there is no election and the annual values are equal, is selected for the purpose by the Commissioners of Inland Revenue.

The Chairman: I think that it would also be convenient to take, at the same time, the Amendment in page 12, line 21, at the end, to insert:
(b) hypothetical rents in respect of land in the United Kingdom.

Mr. Mitehison: Clause 14 is the main Clause dealing with the whole question of the abolition of Schedule A and the extension in place of it of provisions of Schedule D. It relates to premises of every kind—not merely to houses in the ordinary sense of the word, but also to multiple shops, and so on. There can be no doubt about that. The Amendment.

however, relates only to dwelling-houses or residences. I have taken the term "residence" because it occurs elsewhere in the Bill and it seems convenient for the purpose.
The object of the Amendment, put very shortly, is to provide that the relief afforded by this change shall not go to any one person in respect of more than one house in the year of assessment. The relief is given to the occupier and in respect of his beneficial interest, but I imagine that no one will dispute that, just as a multiple shop firm can occupy premises all over the country, so an individual can occupy more than one residence at the same time.
Take, for instance, a man who has a house in Surrey, perhaps in the part sometimes called the stockbroker belt, and who comes up to a flat in London, exceptionally his own flat, but still his flat, and occupies it during the middle part of the week. He is, as I see it, the owner-occupier of both those residences. I suggest that the Committee—there is very considerable support in the past for this—should not extend this relief to the same person in respect of both those residences at the same time.
The White Paper shows us that the abolition of Schedule A will mean in the current year a concession of £35 million and in a full year a concession of £48 million. It must be recognised, however, that the way in which it is done may well result in some people being rather worse off for the change, although the majority of them obviously will be better off. Therefore, the Amendment takes the precaution of providing, in accordance with the rules of order, and in this instance I should have thought in accordance with the common sense of the matter, that if it is accepted no one will pay any more tax than he would have been liable to pay but for the whole change. By "the whole change" I mean the abolition of Schedule A and its replacement by Case VIII of Schedule D.
I confess that we on this side of the Committee, having in the past found this a comparatively simple matter to put on to paper, because all we asked was for an exemption from an existing Schedule A in favour of owner-occupiers and in favour of a single house, found our task a good deal more difficult when the drafting character or the technical


character of the change made by the Government had to be considered. It seemed impossible to keep Schedule A alive for the sole purpose of dealing with people who had more than one residence.
For the reason I will give in a minute, it would have been easy to deal with the commercial or industrial occupier of more than one set of premises, but not so in the case of a resident. It seemed that the only possible way to do it was to treat him in parallel, as it were, as if he had been occupying a rented house, to regard him as paying the rent himself, and to charge that rent or the amount of it under Case VIII of Schedule D.
This rather involved and artificial process I must say filled me, at any rate, with some terror at the beginning of the operations. When I had finally drafted the Amendment, I showed it to a close associate of mine, whose comment was instantaneous and immediate, because what we were producing was a hypothetical rent. The comment raised, it is true, a small question about tents as residences. It ran like this:
There once was a man in a tent,
Who paid hypothetical rent.
It was deemed to include
What he thought might be rude,
But he never found out what it meant.
I appreciate the spirit of that comment as applied to the Amendment, but I must say I was encouraged to find that in another part of the Bill the Government have done exactly the same thing. They have done it in connection with estates. They have set out a whole lot of provisions which seem to me to be as applicable to this hypothetical rent as to the rent mentioned there which, I may say, though it is not called hypothetical, is just as hypothetical as this one.
Accordingly, the Amendment in subsection (2) contains a reference to passages in Schedule 4, on page 71 of the Bill as now printed, which deal with the case of an owner—occupying a residence and being treated as if he were entitled to rent for a period. I need not go into that in detail. I doubt whether the Committee is really concerned with it. The substantial point is the one I have stated, and I mention these matters only to show that what appears at first sight to be a little far-fetched may possibly be the only

way of dealing with what hitherto was a fairly simple question, but has become a complicated one by reason of the complete abolition of Schedule A.
I said something about the history of this matter. It is worth having a look at it. It begins for my purpose in 1961–62, when two Amendments appeared on the Notice Paper in the names of a number of Conservative Members, the leading spirit in one case being the hon. Member for Kidderminster (Sir G. Nabarro) and, in the other, another Conservative Member. They were both quite well supported. Both those proposals, which were to exempt owner-occupiers from Schedule A liability, contained an express reservation that the exemption was only to be in respect of one house or residence in the year.
What I think is very interesting about it is that one of the supporters of the new Clause of the hon. Member for Kidderminster was the present Financial Secretary. However, something must have happened in the interval, because when the Amendment came to be debated not only did it receive only a little support in Conservative circles, but I notice that the Financial Secretary voted against it. He must have changed his mind. He had no doubt taken his name off the Amendment in the interval. I think that I can rely on this as showing that intelligent and experienced people like the Financial Secretary thought that it was advisable to restrict the benefit to one house in a year.
I would go a little further. I have looked through the efforts of other parties. We have all been in this. I think that I am right in saying that on every occasion the Liberal Party—I always hesitate to say that, but I think it is on every occasion—has confined the remedy to a single house in a single year.

Mr. Donald Wade: Mr. Donald Wade (Huddersfield, West) indicated dissent.

Mr. Mitchison: I beg the pardon of the hon. Gentleman. He will agree with me that the Liberal Party did so on some occasions, but there may have been others. Perhaps I have not followed it through far enough.

Mr. Wade: I may have an opportunity to develop this a little. At this


point, may I say that we were prepared to take half a loaf on some occasions, but that we have always wanted the whole loaf?

4.0 p.m.

Mr. Mitchison: Be that as it may, the days of Whig lords occupying several houses about the countryside are past, and I think that we shall have to consider this matter in rather different social circumstances. I am interested particularly in the attitude of the Government and their supporters, of whom I expect a mass to come and support us on this Amendment, if on nothing else, when we divide on it. Otherwise, there will be grave inconsistency with what they have said previously.
For our part, the story is the same. We on this side have never hesitated about it. We have always felt that the reasons for the exemption, as it was in those days, were social reasons, into the merits or demerits of which I shall not go now, upon which, though, there may be a good deal to be said about them when we discuss the Clause as a whole. We have regarded this as a relief which should be given to those who occupy and continuously live in one house.
We do not wish to exclude the person who has two or more houses; we wish merely to confine the considerable benefit of the Clause, which is what in most cases it will bring, to one house. Accordingly, we provide that a principal residence should be selected. It sounds rather magnificent. It is quite possible for a man to have two small houses, both, by curious coincidence, of about the same size, and by the Amendment we allow the taxpayer to select which house should be treated as his principal residence. If he does not select, we take the one which is most expensive, the one with the highest assessment and, therefore, the most in his favour, but if, even then, he will not opt, we would allow the Commissioners of Inland Revenue to select.
I imagine that cases of this kind would be rare and, however reluctant the Commissioners might be to accept the duty, it is very doubtful that they would ever be called upon to perform it.
That is the substance of the Amendment. It must be considered partly with

the history of the matter in mind and partly with some consideration for what we are trying to do by the change made in the Bill. It looks very different in form, it covers several matters, but it is intended to be the abolition of Schedule A in favour of the owner-occupier. It is significant, when we are considering a question of this sort, that, whatever the half, three-quarters or whole loaf asked for by the Liberal Party may amount to, the general sense of the House has always been that it ought to be confined to one house.
I hope that the Government, having considered the Amendment, will tell us what addition or subtraction it would make to the two figures I have already given, the total cost of the concession in the current year and the cost of the concession in a full year. I call it a concession for simplicity, but, of course, it is a radical change.
We have now to consider what the hypothetical rent, as it is here described, really amounts to. Again, the Bill is quite encouraging to those who want to make things as simple as possible. In Schedule 7, we find the basis on which the hypothetical rent is to be assessed. It is assessed on the ascertainment of annual value. I have looked at the definition of annual value here, and it seems remarkably like annual value as it has been defined and used for other purposes. I hope that I shall be corrected if I am wrong, but there seems to be no great difference, for example, between the annual value as ascertained in this way and the Schedule A valuation as ascertained by the Inland Revenue in the past, subject to questions of Schedule A having had various hypotheses in it which may or may not occur in this case.
Broadly speaking, when we are dealing with annual value and treating it as the Government do in Schedule 4 as the basis for an assumed rent, we are, in effect, coming remarkably close to what the intention of the Committee has always been in the past, that is, to preserve the Schedule A liability, though in a rather different form, in cases where a man occupies more than one house and has already got the benefit of the change in respect of one house out of the two or the bunch which he occupies.
We are, therefore, carrying out what hon. Members have supported enthusiastically in previous years, because the restriction we propose has, for all practical purposes, very nearly always—I put it in that way—been there and clearly represents the view of hon. Members about the social requirements of the concession. What we are trying to do is to consider the case of a man who, to take a very simple example, lives in a single house, does his work from there, and who has felt a sense of grievance in the past because he thought he was being assessed on some money which he had never, in fact, received. I shall not go into the merits of the change as a whole, but I think that that has been the feeling behind it. At least, that is my experience of what the feeling has been, and I imagine that other hon. Members will have found much the same.
If we are now to extend this to someone who has several houses, to his second, third, fourth and nth house, we shall be doing something which has singularly little relation to the true character of the discontent which has been felt or to the feeling that there was a social injustice in having a tax of this kind.
I cannot believe that anyone will get really indignant because he only has a concession, which is made to owner-occupiers, in respect of one out of his plurality of houses. If he is so indignant, I cannot find any corresponding indignation in myself. I cannot feel that he has been hardly done by or that there is any social injustice in preserving for him something remarkably like the existing position in respect of all but his first house, his principal residence, as we call it.
There is always the feeling about the taxation of houses, whether nationally or locally, that there is a sort of imbalance about it—I do not say unfairness—in that one does not pay rates, on, for instance, a Rolls-Royce motor car but one does pay rates on a small house. This has been behind a lot of the feeling about Schedule A. People have noted that those with other property did not pay tax according to what was regarded, rightly or wrongly, as a notional basis, and they have felt that

it was rather unfair that their own houses should be selected. On the other hand, when someone has half a dozen houses, there is not the same matter for indignation even on that ground.
I do not wish to delay the Committee unduly. This is quite a simple matter. As I say, it does not raise the various broad questions which we may have to consider when we debate the Clause stand part. It does not say that the amount of the concession should be limited to a small or large sum and I am open to accept the point that some people occupy houses so large that their property might be treated as being a dozen houses under one roof.
There are such cases and we cannot deal with every question of social justice or injustice within the taxation machinery, particularly on an Amendment such as this. There is, after all, another side to this matter. In a good many cases the owners of large houses have had other benefits conferred on them. I am thinking, for example, of historic houses, the owners of which may have had help from public funds. There are other cases, particularly historic or artistic premises, where the owners have benefited from the half-crowns received from visitors and, perhaps, as a result of having sold them tea. These are all matters which may arise in connection with this change and we will have to consider the relation of these activities to other trading activities which are carried on from a house.
In practically every case the owners of multiple shops—which are not touched on in the Amendment—will, no doubt, get out of the Sechdule A assessment, but, in doing so, they may well fail to get the deduction of that assessment which they would otherwise have made in arriving at their profits which are taxable under Schedule D. At first sight, no doubt, it is rather staggering to reflect that the change will relieve some multiple shops—or a bank, for example—of a considerable Schedule A liability in any year. My hon. Friends and I do not think that there is as much in that as appears at first sight because of the consequent result in connection with their Schedule D assessments. That does not arise directly on the Amendment and we shall probably wish to consider it at a later stage.
I repeat that the Amendment is concerned with one point only—the question whether a man should be entitled to the benefit of this change in respect of more than one residence in one year. We say that in a modern country, which is supposed to be civilised, we do not want to stretch ourselves to extend tax concessions in favour of someone's second, third or fourth house. He should, in so many cases, be able to get along with one; and if someone can suggest a case where more than one residence is required and should receive this concession I venture to think that any such case would be highly exceptional.
Having regard to the opinions expressed by all hon. Members in Amendments and proposed new Clauses on previous Finance Bills, to the considerable number of hon. Members who have already indicated their support for the Amendment we are discussing—though in a different form, naturally—I trust that the Amendment will receive the acceptance of the Government. If not, I hope that it will receive the overwhelming support of the Committee.
I think that my hon. Friends should not be particularly reluctant to face a General Election on the question whether someone should get a valuable tax concession not only in respect of one house of which he was the owner-occupier, but in respect of half a dozen. Most people would think that that was, to use a colloquialism, a bit stiff.

4.15 p.m.

Mr. F. J. Bellenger: I sympathise with the purpose of the Amendment and I hope that when the Chief Secretary replies he will not only say whether or not he supports it, but will tell us something about the machinery for operating the change. Many people, some of them hon. Members, have objected to the abolition of Schedule A because of the unfairness which they think would be caused to tenants who pay rent.
As the Committee knows, Schedule A is an assessment which is generally fixed once every five years, a quinquennial reassessment, on hereditaments. I am wondering, therefore, how the Inland Revenue will ascertain who is the beneficial owner-occupier. Hitherto, the assessments have gone with the hereditaments and the only question has been whether

or not the occupier was the owner. If we do away with Schedule A and the whole machinery involved in it, then how will the Inland Revenue assess a hypothetical rent, such as that mentioned by my hon. and learned Friend the Member for Kettering (Mr. Mitchison)? Would a not mean, in effect, reintroducing the whole Schedule A machinery by way of the Inland Revenue's valuer regarding the second, third or fourth house?
Under the Schedule A procedure—and my hon. and learned Friend did not refer to this—the hypothetical income is part of the taxpayer's income. If he has two, three or four houses he will, for the purposes of assessing his total income, either for Income Tax or Surtax, have a rent or valuation for each property which he holds. Thus, in doing away with Schedule A we are not only doing away with the tax on the hereditament, but we are also giving, for a certain number of owners who own more than one house, a considerable advantage, because once their Schedule A assessments have gone then for all the houses in question they need not insert in their annual returns the hypothetical or Schedule A value for each property.
It is obvious that while the Government wish to relieve house owners, especially those with mortgages and so on, they are not only giving the relief to these people but are giving to multiple house owners a considerable tax and, perhaps, even Surtax concession. My hon. and learned Friend has inserted in the Amendment a provision to the effect that the tax payable by the multiple property owner or occupier should not be more than what it would have been had he been assessed under Schedule A. Those who own more than one property are well advised by professional people and can eliminate their Schedule A tax by virtue of maintenance claims.
To that extent, even if the Amendment is accepted, it will be possible for those owning more than one house to evade paying tax on their subsidiary residences, if I may call them that, because of maintenance claims for repairs. My hon. and learned Friend told us that he does not want to put them in a worse position than they are under Schedule A. I think that many hon. Members on both sides of the Committee are in sympathy with his purpose, namely, that although we wish to


help, as we have urged on successive Chancellors, those who are buying their own houses and who are already burdened with mortgages, we do not want to give an advantage to those who are not in that position and who can well afford to pay tax on their possessions, whether stocks and shares, or other hereditaments.
I should like the Chief Secretary to explain a little more about the machinery of assessment under the new Case VIII once he has eliminated the Schedule A assessment. Whether that arises on this Clause, I am not quite sure, but I think that he should at any rate answer the point that I have put to him as to how he will define the owner-occupier under this Clause.

Mr. Wade: I am inclined to agree with the right hon. Member for Basset-law (Mr. Bellenger) that those who own several houses are the most likely to pay no Schedule A tax owing to the amount that they are able to spend on repairs, thereby cancelling out their Schedule A tax by maintenance claims. Therefore, that somewhat diminishes the merits, if any, of this Amendment.
The Amendment is somewhat complicated, but I think that the issue is fairly simple, namely, whether the Committee is in favour of total abolition of Schedule A Income Tax. The most powerful arguments for retaining Schedule A tax have been made from the Treasury Bench over a number of years. There will certainly be some eating of words from the Treasury Bench during the course of this debate.
Those who are opposed to Schedule A have, in previous debates, put forward three points of view. One is that no Schedule A tax should be paid by the owner-occupier in respect of one house. The second is that no owner-occupier should pay Schedule A tax, but, otherwise, Schedule A tax should remain. The third is that Schedule A tax should be abolished altogether. I have been willing to support the proposal for the abolition of Schedule A tax on one house as the first step, but I have always been in favour of total abolition.
In recent years, the Amendments which I have tabled to Finance Bills have been intended to bring about total abolition, although, as I mentioned on Second Reading, I often puzzled over the

whether it could be done by one paragraph or two, and I now find that it requires several pages to do it, but the intention is the same.
I agree that on questions of social justice and social requirements it is the owner-occupier of one house that we are worried about. I have always felt that there are strong reasons for total abolition. I shall mention two. First, take the case of the landlord, that is both the individual landlord and the property-owning company. I do not think that there will be a loss of revenue there, because tax will be paid on the rent received, less such deductions as are allowed, and it may well be that under the existing law some landlords and some property-owning companies may have been paying less tax than they should have done because they have had the advantage of the statutory allowance, whether they spend money on repairs or not.
The landlord who spends nothing on repairs gets the benefit of the statutory allowance, whereas, if Schedule A is abolished, the tax will be calculated in a different way and this whole complicated business of property tax and statutory allowance will, as I understand it, no longer arise. Therefore, concerning the landlord, I can see no objection to total abolition of Schedule A.
The other reason why I have always advocated the abolition of Schedule A is that I think that the whole concept of notional income is too complicated. It gives rise to many anomalies, and it would seem to me that the same kind of arguments which have been deployed against notional income should be deployed against this new idea of a hypothetical rent. For example, under the old Schedule A tax, if I owned two houses, I would pay Schedule A tax on both. If I owned a house and a house-boat, I would pay Schedule A on the house, but not on the house-boat. If I owned a house and a caravan I would pay Schedule A on the house, but not on the caravan. It would seem to me that similar kinds of anomalies would continue here. Would there be a hypothetical rent in respect of the house-boat and the caravan, or would it only apply to the dwelling-house? I do not know the answer. I think that that indicates the kind of difficulties that would arise.
Rates have been mentioned, but they are a different matter. However many houses one owns, one would pay rates if they are furnished. I should be out of order in pursuing it now, but I am in favour of paying some rates on empty properties. However, that is another matter. As to Schedule A tax, I would have thought that having at long last got the Government to do something about it, we should be well advised to go all out for total abolition.

Mr. William Warbey: I suppose that when the Chief Secretary replies he will make a number of hypothetical rents in the hypothetical tent constructed by my hon. and learned Friend the Member for Kettering (Mr. Mitchison). On the other hand, I shall try, if I can, to defend him in advance from these blows that are being prepared to be struck.
I cannot follow the hon. and learned Gentleman through all the fisco—legal jungle in which he so brilliantly led the Committee in introducing this Amendment, but I should like to take up the point that he made when he asked what we are really trying to do. That is what the layman outside this Committee will ask. He will ask what we are trying to do and whether we have taken the proper steps to achieve it. In general principle, I would say, whatever may later be said from the Government Front Bench, that if it is right to do a certain thing one can find legal and fiscal ways of doing it.
4.30 p.m.
It seems to me that what we are trying to do here is to take one more step in the direction of placing our system of taxation on a basis of social justice. The Treasury has argued for years that it is right to tax under Schedule A because a notional income is derived. Today, we shall be told that this is nonsense and that all along the Treasury has been mistaken in regarding the value received by the occupier of a house from living in a house which he owns as something which should be subjected to tax. We shall be told that he has paid for the income which he is notionally receiving. He pays for it when he buys the house, and the purchase price represents the capitalised value of the rent which otherwise he would be compelled to pay if he were not able to afford to buy. Therefore, there is no real addition to income and,

consequently, no additional income to be taxed.
I accept that second view. It seems to me very sensible and reasonable. I accept it on the basis of what seems to me to be an underlying principle of our modern tax law—that we arrange our taxation so that it does not fall upon expenditure on the necessities of life. That is the underlying principle of the adjustments which we make in Income Tax by way of personal and other kinds of relief. We say, in effect, that it is wrong in principle for the State to levy tax on money which people have to use in order to purchase the necessities of life—food, clothing and shelter.
We apply this principle in certain other fields, for example, when we assess people's liability to contribute towards the cost of legal aid. We then assess them on the basis of their disposable income and we exclude from that disposable income, in making that assessment, the money which they have necessarily to pay in the form of rent or of mortgage payments on their house.
It seems to me that that principle should now be applied clearly and logically to our tax law. Therefore, it follows that it is wrong to tax a man on the money which he necessarily spends to provide living accommodation for himself and his wife. I shall be introducing to the Committee later, for that reason, a further Amendment to provide relief of taxation on the payment of rent. I cannot discuss that any further now. What I can discuss further is the question whether, having decided that we relieve a man of taxation on the expenditure which he necessarily has to incur in order to provide living accommodation for himself and his family, we should also relieve him of tax on providing not necessary accommodation, but some additional form of luxury or semi-luxury enjoyment for himself and his family.
There are a great number of people who, in addition to owning a house in town, own a little weekend cottage to which they can go for refreshment and enjoyment. The number of people in that category is increasing, but this is not a necessary expenditure. This is something which people voluntarily choose to do in order to add to their enjoyment of life, just as they voluntarily choose to spend money on alcohol or


tobacco. No one for a moment would suggest that they should be relieved of taxation on either of those two items.
Therefore, whilst I would say that it is absolutely right to relieve people of taxation on their necessary expenditure on living accommodation, whether in the form of rent or mortgage payments or of the notional income from a house, it would be utterly wrong to extend that principle to relieving them of taxation on such additional and supplementary facilities as they provide for their own enjoyment.

The Chief Secretary to the Treasury and Paymaster-General (Mr. John Boyd-Carpenter): It is a practice, and I think a rather bad one, sometimes in this Committee to begin a speech with the observation that one hopes that such and such a Member will forgive one for not following his arguments on a certain subject.
In this case, I must begin by asking the hon. Member for Ashfield (Mr. Warbey) to forgive me if I do not debate the very ingenious argument against the Amendment which, first of all, he established and which later, to his own satisfaction and without undue difficulty, he subsequently demolished. I would prefer not to follow him in an interesting essay in sumptuary taxation, but to give the reason why we do not think that this is a good Amendment.
The hon. Member for Sowerby (Mr. Houghton) obviously recalled, when we came to Second Reading, the fact that in the Budget debate I identified him as the sole mourner beside the coffin of Schedule A. I congratulate him on recruiting another in the guise of his hon. and learned Friend the Member for Kettering (Mr. Mitchison) as, I may say, a mourner rather than a mute. I was interested to note this attempt to maintain just a flicker of life, and perhaps I should say a hypothetical life, in the dying body of Schedule A.
It was an ingenious argument that was put forward, but I thought, with respect, that the hon. and learned Member for Kettering put far more weight than it would bear on the argument that the proposal had been put forward in this shape by other hon. Members, including

no less a personage than my hon. Friend the Financial Secretary and even my hon. Friend the Member for Kidderminster (Sir G. Nabarro). The fallacy of that argument, and nobody knows it better than the hon. and learned Member, is that when one is not in office, and one is seeking to obtain an adjustment or concession on taxation one always puts it, for the purposes of argument, as low as possible.
The hon. and learned Gentleman knows that perfectly well. When Schedule A was being maintained, it was understandable—and, I should have thought, extremely sound parliamentary tactics—to put the argument for the abolition of part of it, a very large part of it, as low as one could. That is how one always does things if one is out of office, and as the hon. and learned Gentleman has ahead of him, I hope, a great many years in which he will be in this House but out of office, I hope that he will bear in mind that little bit of very friendly advice—

Mr. Mitchison: I am very much obliged to the right hon. Gentleman. On this side, we meant it; I accept, of course, his proposition that his hon. Friends did not mean it.

Mr. Boyd-Carpenter: I accept the hon. and learned Gentleman's very graceful acknowledgment of the fact that we are very much better parliamentarians than are his hon. Friends. I must welcome, and admit into our company, the hon. Member for Huddersfield, West (Mr. Wade), who, with a realism rare, if not unique, in his party, said that he would rather have the whole loaf than part of it. The hon. Gentleman will do well in his party.
The right hon. Member for Bassetlaw (Mr. Bellenger) raised the very practical question of what this limitation of the abolition of Schedule A would mean in terms of administration and mechanics. He is quite right. Although I do not base my argument on this, there are very serious and practical considerations. The fact, to which the hon. and learned Gentleman referred, that there is a provision in the first paragraph of the Amendment to the effect that the new hypothetical rent shall not involve a higher commitment than Schedule A, had it remained,


would have involved for the person concerned was, I thought, put in in an attempt to get round the rules of order.
The hon. Member for Sowerby says that it was, but his hon. and learned Friend says "No—it was also common sense," so I am sorry that we have a split in the party opposite on this issue—

Mr. Douglas Houghton: Keeping the Amendment within the rules of order is also common sense.

Mr. Boyd-Carpenter: Yes, but the hon. Gentleman's hon. and learned Friend, in a more generous way, said that it was also common sense on the merits of the matter.
If we are to maintain this provision, whether on merits, to please the hon. and learned Gentleman, or as a matter of parliamentary adroitness, to please the hon. Member for Sowerby—and I am anxious to meet all tastes in this respect —and have Schedule A continued then, in order to get at that figure—and here the right hon. Member for Bassetlaw is absolutely right—we would have to preserve the whole machinery of Schedule A of statutory deductions, valuations and allowances for repairs. One would think that for a very small matter, as I understand it, in terms of money, it would not be right to preserve all that administrative machinery, the difficulties and, sometimes, the anomalies of which many of us who have had experience in the matter well know.
I cannot tell the hon. and learned Gentleman what would be saved to the revenue by what he describes as this concession—rather an odd way, in a Finance Bill, of describing a concession—but I am advised that it would inevitably be very small. What is, however, quite certain is that we would have to preserve a good deal of the administrative apparatus of Schedule A. That would be a pity—

Mr. Mitchison: It seems to me, looking at the passages in page 71 of the Bill as now printed—part of Schedule 4 they are referred to in the Amendment—and looking also at the definition in Schedule 7, that the Government themselves are bound to preserve some of the machinery, and no more than the machinery I would wish to preserve, for quite a number of properties.

Mr. Boyd-Carpenter: It is quite clear that if we were to preserve adequate machinery to deal with this point of the hypothetical calculation as to what the Schedule A would have been on the house had Schedule A not been abolished, in respect only of such houses as are owned by someone who also owns another house, quite considerable additional administrative organisation would have to be maintained.
4.45 p.m.
I agree entirely with what the hon. Member for Ashfield, I think, said—that if there was a really serious value and purpose in it, it would have to be done. I agree with him that administration must follow policy and good sense. But what is really the point of this? In the first place, it cuts dead against the policy of the Clause, which is that the enjoyment of property which does not bring in rent shall not attract taxation.
That is a good principle, but that good principle would be eroded in this respect in the case of certain people. As I understand, in the opinion of one or two hon. Members, having a second house is in the nature of a luxury—I think that the hon. Member for Ashfield said so—and, because it is a luxury, the people concerned should pay taxation on it and not be relieved as those are to be relieved who have only one house.
That sounds a plausible argument until one sees how it would work. Is it, in fact, in this day and age, generally proved that the possession of a second dwelling-house is in the nature of a luxury? Hon. Members who are very often faced inescapably with the problem of having a home in their constituency—if far from London—and a home in London, know that it is untrue, and that it is a necessity of their lives. Nor would I say that a country cottage, however humble, is of the nature of such a luxury as specifically to attract taxation which is not attracted by other dwelling-houses.
The hon. and learned Member for Kettering gave away the whole case when he said, Of course, in respect of one house, we will leave the exemption from Schedule A, however big and grand that house is." It may be one of the greatest houses in the land, such as that in which my right hon. Friend the Member for Woodford (Sir W. Churchill)—whom we


are all so delighted to see with us this afternoon—was born. On the other hand, someone may possess a country cottage and a small mews cottage in London. That person is, apparently, to be treated by the Amendment as a more suitable vehicle for taxation on sumptuary grounds than is the owner of one mansion, however enormous. I do not think that that makes sense.
I can illustrate this point with a case I know of in my own personal acquaintance. It is that of a man who inherited a substantial house in the country in which, under present conditions, he is unable to afford to live. He moved to a cottage and, as his family grew, took back another cottage into possession and occupied that with his family, too.
That man, had he been rich enough to occupy his ancestral mansion would, as everyone accepts, have been excluded from Schedule A, but because of the reduction in his income, involving his living in two cottages, the Amendment would expose him to the payment of Schedule A on one of them. He would, then, actually pay more tax because he was living, on a relatively limited scale, in two cottages in the park than he would if he were occupying the mansion. I think that illustrates how the idea of using a restriction on withdrawal of Schedule A as a kind of sumptuary taxation would not work.
Even from the point of view of those who put it forward —and I do not accept that there is any necessity for it—this idea would create far more anomalies of just the class and kind to which I have been referring. I do not think that the Committee need worry about the limited number of very rich men who may have several houses. The level of taxation on large incomes remains so very high—so really substantial—that the question of a Schedule A liability—which, in just those cases, is almost always offset by allowances—is really immaterial.
One of the general objections to Schedule A, as we have seen, is that rich and well-advised people have in recent times paid very little. The tax, on the whole, falls on those who have not had the advantage of advice about repairing and maintaining their houses.

I therefore suggest that to preserve all the machinery just to make sure that a certain number of those people are liable for hypothetical rent in place of Shedule A in respect of a second house—or a third house—seems to be completely misconceived.
We should involve ourselves in considerable administrative expense, in an attack on the principle of the Clause and in patent unfairnesses and anomalies between man and man for a very small sum of additional revenue. In the circumstances, I must advise the Committee that we should not be wise in putting this addition in the Clause.

Mr. Bellenger: The right hon. Gentleman has not dealt with the point that I put to him about how one will identify the owner-occupier for tax purposes under this Clause.

Mr. Boyd-Carpenter: I followed what the right hon. Gentleman said, but I thought that he directed his question to the exemption of an owner-occupier. If there is to be any discussion on the Question, "That the Clause stand part of the Bill", my hon. Friend the Financial Secretary will be able to deal with that point more conveniently than I could deal with it on an Amendment designed strictly to restrict the scope of the tax.

Mr. John McKay: I do not wish to introduce a discordant note into the debate. I am sure that all lion. Members are particularly anxious to help the ordinary wage-earner in his struggle to get a house. There is a point here which perhaps has been overlooked. My question is: will the Government's proposal help all the people who are trying to buy their own houses? This is a reduction of taxation, and, of course, everyone likes tax reductions. What will the Government's proposal do for the man who pays no tax and who is having a great struggle to pay the mortgage on his house? It will not help such a man. He will be in the same position after the Clause is passed and implemented as he was before.
This Clause is, in reality, for the better-off people among the working section of the community whom we are all trying to help particularly, but we are not helping those who are worse off and who pay no taxes whatever. There is a very large number of these people, and the


question is, knowing that we are helping a large number of owner-occupiers and giving relief to a large number of householders, cannot we do something in future if not at this moment—

The Chairman: I am reluctant to interrupt the hon. Gentleman, but I hope that he appreciates that we are discussing one Amendment and not the whole Clause.

Mr. McKay: I am referring to the general principle of the Clause. If I am out of order—

The Chairman: The hon. Member has just put his finger on the point. He is dealing with the whole Clause, and that is not in order on this Amendment.

Mr. Cyril Bence: I was interested in the point made by the Chief Secretary about the man who took two cottages. I have sympathy with the Clause. I am not so sure about the Amendment. I have been stimulated to enter the discussion because of what the right hon. Gentleman said. I am thinking of a man with a large family who is evicted from a big house. He might have a claim on a local authority to get a subsidised house and yet he might not be able to do that. Suppose that he sells an investment which perhaps brings in £3,000 in income and then acquires two houses for him and his family. It seems unreasonable to me that he should have to pay taxation even on the second house.

Mr. Houghton: May I try to help my hon. Friend? I cannot conceive circumstances in which a man with a large family was evicted from a large house and, to cope with that situation, was able to buy two smaller ones.

Mr. Bence: I was quoting a hypothetical case based on what the Chief Secretary said. His proposition was that suppose a man lived in a very big house but could not afford to keep it and was evicted because he could not keep up the payments or pay the rates on it and that, in trying to keep it up, became bankrupt. He would be thrown out. Because he has got into hopeless debt, someone would throw him out—perhaps the bank manager or the building society. I do not suppose that he would leave it voluntarily. He would be forced to leave by circumstances and

would have to find alternative accommodation.
Suppose he finds a three-room cottage and he and his large family are bundled into it, but because it is overcrowded, and because he has a bit of money but not enough to buy a big house, he buys another cottage.

Mr. Houghton: My hon. Friend said only a moment ago that the man about whom he is speaking was "broke" and that is why he had to be thrown out of his larger house. Apparently, he could not pay the rent and rates and was hopelessly on his back financially. Yet now, apparently, this hypothetical father of a hypothetical family is buying two hypothetical houses.

Mr. Boyd-Carpenter: At a hypothetical rent.

Mr. Bence: It is obvious that this hypothetical man with his hypothetical family living in a hypothetical big house could have a hypothetical bank balance of £3,000, but could not afford to keep up a big house. A man can have a few thousand pounds in the bank, but still not be able to afford to run a mansion. We must not assume that because a man cannot afford to run a mansion he has not any money. I can afford to run a small house, but not a big one. Because I cannot afford to live in a 20-room mansion in Berkshire, it does not mean that I have not got two ha'pennies for a penny. I might be able to buy a cottage in the country, or to buy two cottages.
I cannot quite accept all this; I am not yet satisfied. I hope that my hon. Friend the Member for Sowerby (Mr. Houghton) will give us further explanation, because I am sure that my hon. and learned Friend the Member for Kettering (Mr. Mitchison) would not put down such an important Amendment without considering the matter. Doubts have been raised in my mind because of the extraordinary situation presented by the Minister and I hope that we shall have clarification of these very hypothetical situations.

5.0 p.m.

Mr. Mitchison: It is really quite simple. We are considering whether certain persons ought to get a concession by way of taxation, which as a whole will cost the country £48 million


in a full year and £35 million in the current year. These are large sums and this is a valuable concession. It was put forward by the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd), not on the ground that the tax was notionally a bad one, but, as he put it, as an act of social justice to encourage home ownership.
That is all very well, but is it an act of social justice in the same way to encourage the ownership of a plurality of homes? Is there the same reason in a case of that sort for giving people a concession which had a particular purpose and, in its present form, is certainly intended to be an act of social justice? Ought it to be applied as a matter of social justice and, in order to encourage home ownership, to the ownership of, say, half a dozen houses all of which some one person occupies? The trouble is that one can occupy half a dozen houses; one can occupy a lot more. That is the question which we have to consider.
The Chief Secretary is a most engaging person. He presents an appearance of complete logic and the confusion in his mind seems to me to be considerable. He came out, quite rightly, with one proposition with which I cordially agree, that administration must follow policy. This was in his best Gibbonian style. I quite agree. Administration must, in-deed, follow policy. Therefore, if this is an act of social justice intended to be done by this Chapter in the Bill, the first thing to consider is whether what is in the Bill, which the Amendment would change, is consonant with that intention and with the social justice which it is desired to further. If it is not, again to quote the right hon. Gentleman, administration must follow policy. I shall show presently, however, that it does not have far to go for the purpose.
I tried to spare the Committee a long excursus into what the Government are doing in the Fourth and Seventh Schedules. The Government are preserving what is virtually Schedule A machinery in a fairly large number of cases—the owners of estates. From the figures we were given by the Chief Secretary, it is clear that the pluralist or multiple owners of houses are also a comparatively small number of cases.

It is putting the cart before the horse with a vengeance to produce as one of the serious arguments against the Amendment that what is done on a small scale might become a real objection to the Bill if the scale was slightly extended.
That is doubly so when one begins to look at what is being done in connection with these estate owners. They are charged a hypothetical rent, and the basis of that hypothetical rent, subject to deductions, and so on, which one would apply in this case as in that, is the annual value. The annual value is stated in the Seventh Schedule.
I said to the Committee—the Chief Secretary heard me—that I seemed to have seen this before. This is the ordinary rating formula and nothing else. I did not expect to be told that there was that insuperable difficulty in preserving, at least for the time being, the machinery for rating valuation. Once that has been done, we have ascertained the annual value in accordance with the Seventh Schedule.
It is throwing dust in the eyes of the Committee to raise all these administrative difficulties. I simply do not believe in them. To do it after having just said that administration must follow policy, and after the previous Tory Chancellor of the Exchequer—I know he is dead, but he is not quite buried—had urged this Measure as a matter of social justice—

Mr. Boyd-Carpenter: The hon. and learned Member knows well that getting the annual value is only the beginning of the operation. If we are to do as the hon. and learned Member suggests in his Amendment and impose no higher tax liability than would have been imposed had Schedule A remained, all the machinery of statutory deduction, maintenance claims and everything else has to be maintained. It is misleading the Committee to say that because it is not unduly difficult to maintain a figure for annual value, the problem has been made quite easy. That is not quite up to the hon. and learned Gentleman's normally high standard of debate.

Mr. Mitchison: I am sorry not to be keeping up to the mark, but I will have another try.
All that is happening here is that the Government for their own purposes, with


which I am inclined to agree in this case, are preserving a certain part of the Schedule A machinery. What they are doing is applying the annual value as the basis of taxation in the case of estates. All I am asking the Committee to do is to agree to that also being done in the case of multiple house occupiers. That is no wild extension.
If I had had to invent all the machinery, I should have had a busy time and probably by now I would be sitting in a lunatic asylum with a wet towel round my head; but the Government, without necessarily going into a lunatic asylum, have done it all for me, not only as a matter of drafting, but as a matter of machinery to be used. Immediately after saying that administration must follow policy, to put up that argument is not up to the right hon. Gentleman's usually high standard of debate.
It makes one suspicious when we get this kind of case put up—this noise about administrative difficulties, keeping things going, and so on—when one knows perfectly well that this chapter as a whole has been put forward as a supposed measure of social justice and will be supported by right hon. and hon. Members opposite in the coming General Election as something which they have done as a matter of social justice. I enjoin this on them. Whenever they say it, will they kindly point out that they have also provided social justice in the same measure for the fortunate man who both owns and occupies half a dozen houses? They will then have to find out just how popular in the country that bit of social justice will be.
It was the Chief Secretary who started talking about luxury and the rest. I never talk about luxury in connection with taxation if I can possibly avoid it. I am simply considering whether it is right to give out of public funds to this small group of people a share of the considerable total that is being provided for good purposes out of public funds for other people. It is rather surprising that right hon. and hon. Members opposite are prepared to neglect that aspect and to say that this is stigmatised as luxury—I never used the word, and it is not luxury—and to draw a prophetic and, no doubt, up to a point, a true picture of the man who requires a little weekend house.
I doubt whether this will make much difference to him one way or the other. It was the intention of part of the Amendment which I had to put in to comply with the rules of order, something which also seems to me to be quite good sense. But I am not sticking like mad to that. We cannot do anything else in this Committee, since it is right that, given financial control of the Government over expenditure, the Opposition should not be allowed to put down Amendments involving additional charges on the subject. That is the rule. It is simple and one sees the reason for it.
But responsible Treasury Ministers should not try to use the existence of the rule in order to confuse the issue or to dodge responsibility which really lies on them. If some new charge is involved here, it is up to them to make proper provision for what is required. I do not think other things are required. This is largely a matter of what is in principle an important Amendment, although its monetary effect is not a very large one. Surely the Government have a better defence than this.
But then we come to the right hon. Gentleman's real defence and it is a most remarkable one. He said that hon. Gentlemen on his side of the Committee have put this proposal down year after year limited to one house only, as a matter of Parliamentary tactics. What leads them to do that? Why should they not have told the people what they really meant? It is not as if this matter had occurred only once and could be described as a slip. It has happened time and time again and has been argued in that sense from the benches opposite. Are we now to take it that when a matter is constantly advocated by hon. Members opposite it must be assumed that they do not mean what they say? That is the only deduction one can draw from this confession by the right hon. Gentleman.
On this side of the Committee we put down Amendments for the simple reason that we mean them. I find a little difficulty in ascertaining the reasons of the Liberal Party but perhaps they are of less importance on this occasion. They are connected with a loaf of bread, whether half or the whole. But hon. Members opposite are not doing this. It


happens in a case of this sort if, in the course of defence, through the mouth of a much respected and senior member of the Government, of their refusal of an Amendment, they have to say that when they put proposals on the Order Paper year after year it was just Parliamentary tactics.
We on this side of the Committee are not as clever as that. We try to put on the Notice Paper what we think to be the right thing to do. That practice seems to have been entirely abandoned in this matter by the party opposite. In talking about Parliamentary tactics the right hon. Gentleman would have been wiser to have concealed the objective of his hon. Friends rather than flaunt it as the main objection to the Amendment.
This is really a childish business. Here is a large change to be made in the tax law in the interests of social justice in order to encourage owner-occupiers. I am not concerned with the merits or demerits of the whole business or the machinery for it. I see the point of it and we have made similar proposals in previous years.

But here is a small part of it which no one can really regard as an act of social justice. If we want to encourage owner-occupation of houses, that is well and good. But are we really going to pay a considerable amount out of public funds in order to encourage someone to occupy as an owner half-a-dozen houses?

Where is the social justice or sense in that? What is the use of doing that kind of thing and then attempting to defend it by saying, "We have always stood for it but we never meant it. It was tactics and, then again, there are administrative difficulties. The principle applies to one group of people and what we want to do is possible for them, but if one goes too far it becomes impossible. In the words of the poet, administration follows policy."

Let it, in this instance, follow policy and let policy for once follow sense and have some relation to the purpose of the various changes it is proposed to introduce.

Question put, That those words be there inserted:—

The Committee divided: Ayes 154, Noes 222.

Division No. 115.]
AYES
[5.15 p.m.


Ainsley, William
Foot, Dingle (Ipswich)
Lee, Frederick (Newton)


Allaun, Frank (Salford, E.)
Foot, Michael (Ebbw Vale)
Lever, L. M. (Ardwick)


Barnett, Guy
Forman, J. C.
Lewis, Arthur (West Ham, N.)


Beaney, Alan
Fraser, Thomas (Hamilton)
Mabon, Dr. J. Dickson


Bellenger, Rt. Hon. P. J.
Galpern, Sir Myer
McCann, John


Bence, Cyril
George,LadyMeganLloyd(Crmrthn)
MacColl, James


Bennett, J. (Glasgow, Bridgeton)
Ginsburg, David
McKay, John (Wallsend)


Benson, Sir George
Gourlay, Harry
McLeavy, Frank


Blyton, William
Grey, Charles
MacPherson, Malcolm (Stirling)


Boardman, H.
Griffiths, Rt. Hon. James (Llanelly)
Mallalieu, J.P.W. (Huddersfield, E.)


Bowden, Rt. Hn. H. W.(Leics, S.W.) 
Griffiths, W. (Exchange)
Manuel, Archie


Bowles, Frank
Gunter, Ray
Mapp, Charles


Boyden, James
Hamilton, William (West Fife)
Marsh, Richard


Braddock, Mrs. E. M.
Harper, Joseph
Mayhew, Christopher


Bray, Dr. Jeremy
Hart, Mrs. Judith
Millan, Bruce


Broughton, Dr. A. D. D.
Hayman, F. H.
Mitchison, C. R.


Butler, Herbert (Hackney, C.)
Healey, Denis
Monslow, Walter


Carmichael, Nell
Henderson, Rt Hn Arthur (Rwly Regis)
Moody, A. S.


Chapman, Donald
Herbison, Miss Margaret
Morris, John


Cliffe, Michael
Hilton, A. V.
Moyle, Arthur


Collick, Percy
Holman, Percy
Mulley, Frederick


Corbet, Mrs. Freda
Houghton, Douglas
Noel-Baker,Rt.Hn.Philip(Derby, S.)


Crosland, Anthony
Hoy, James H.
Oliver, G. H.


Grossman, R. H. 8.
Hughes, Emrys (S. Ayrshire)
O'Malley, B. K.


Cullen, Mrs. Alice
Hughes, Hector (Aberdeen, N.)
Dram, A. E.


Darling, George
Hunter, A. E,
Paget, R. T.


Davies, G. Elfed (Rhondda, E.)
Hynd, John (Attercilffe)
Pannell, Charles (Leeds, W.)


Davies, Ifor (Gower)
Irvine, A. J. (Edge Hill)
Pargiter, G. A.


Davies, S. O. (Merthyr)
Irving, Sydney (Dartford)
Parkin, B. T.


Deer, George
Jeger, George
Paton, John


Dempsey, James
Jenkins, Roy (Stechford)
Pavitt, Laurence


Diamond, John
Johnson, Carol (Lewisham, S.)
Peart, Frederick


Dodds, Norman
Jones, Dan (Burnley)
Popplewell, Ernest


Donnelly, Desmond
Jones, Elwyn (West Ham, S.)
Prentice, R. E.


Driberg, Tom
Jones, T. W. (Merioneth)
Price, J. T. (Westhoughton)


Ede, Rt. Hon. C.
Kelley, Richard
Pursey, Cmdr. Harry


Edwards, Walter (Stepney)
Kenyon, Clifford
Reid, William


Fernyhough, E.
King, Dr. Horace
Reynolds, G. W.


Fitch, Alan
Ledger, Ron
Rhodes, H.




Roberts, Albert (Normanton)
Spriggs, Leslie
White, Mrs. Eirene


Roberts, Goronwy (Caernarvon)
Steele, Thomas
Whitlock, William


Robertson, John (Paisley)
Stonehouse, John
Wilkins, W. A.


Robinson, Kenneth (St. Pancras, N.)
Stones, William
Willey, Frederick


Rogers, G. H. R. (Kensington, N.)
Strauss, At. Hn. G. R. (Vauxhall)
Williams, LI. (Abertillery)


Ross, William
Stross, Dr.Ba-nett(Stoke-on-Trent,C.) 
Williams, W. T. (Warrington)


Royle, Charles (Salford, West)
Swingler, Stephen
Willis, E. C. (Edinburgh, E.)


Shinwell, RI. Hon. E.
Taverne, D.
Wilson, At. Hon. Harold (Huyton)


Silverman, Julius (Aston)
Thomas, torwerth (Rhondda, W.)
Woof, Robert


Slater, Joseph (Sedgefield)
Thornton, Ernest
Yates, Victor (Ladywood)


Small, William
Timmons, John
Zilliacus, K.


Snow, Julian
Warbey, William



Soskice, At. Hon. Slr Frank
Weltzman, David
TELLERS FOR THE AYES:




Mr. Lawson and Mr. Redhead,




NOES


Allan, Robert (Paddington, S.)
Foster, John
Marples, At. Hon. Ernest


Arbuthnot, John
Freeth, Denzil
Mathew, Robert (Honiton)


Ashton, Sir Hubert
Gardner, Edward
Matthews, Gordon (Meriden)


Atkins, Humphrey
Gibson-Watt, David
Maudling, At. Hon. Reginald


Awdry, Daniel (Chippenham)
Gilmour, Ian (Norfolk, Central)
Mawby, Ray


Balniel, Lord
 Glover, Sir Douglas 
Maxwell-Hyslop, R. J.


Barber, Anthony
Glyn, Sir Richard (Dorset, N.)
Maydon, Lt.-Cmdr. S. L. C.


Barlow, Sir John
Green, Alan
Miscampbell, Norman


Botsford, Brian
Gresham Cooke, R.
Montgomery, Fergus


Beamish, Col. Sir Tufton
Grimond, Rt. Hon. J.
More, Jasper (Ludlow)


Biffen, John
Grosvenor, Lt.-Col. R. G.
Morgan, William


Biggs-Davison, John
Harris, Frederic (Croydon, N.W.)
Morrison, John


Bingham, R. M.
Harris, Reader (Heston)
Mott-Radclyffe, Sir Charles


Birch, Rt. Hon. Nigel
Harrison, Brian (Maldon)
Neave, Airey


Bishop, F. P.
Harvey, Sir Arthur Vere (Macclesf'd) 
Nicholson, Sir Godfrey


Black, Sir Cyril
Harvle Anderson, Miss
Nugent, Rt. Hon, Sir Richard


Bourne-Arton, A.
Hastings, Stephen
Oakshott, Sir Hendrie


Bowen, Roderic (Cardigan) 
Heald, Rt. Hon. Sir Lionel 
Orr, Capt. L. P. S.


Box, Donald
Hendry, Forbes
Osborn, John (Hallam)


Boyd-Carpenter, Rt. Hon. John
Hiley, Joseph
Page, Graham (Crosby)


Brewis, John
Hill, Dr. Rt. Hon. Charles (Luton)
Pannell, Norman (Kirkdale)


Bromley-Davenport,Lt.-Col.SirWalter 
Hill, Mrs. Eveline (Wythenshawe)
Pearson, Frank (Clitheroe)


Brooman-White, R.
Hill, J. E. B. (S. Norfolk)
Peel, John


Brown, Alan (Tottenham)
Hocking, Philip N.
Percival, lan


Browne, Percy (Torrington)
Holland, Philip
Plckthorn, Sir Kenneth


Bullard, Denys
Hollingworth, John
Pitt, Dame Edith


Builus, Wing Commander Eric
Hoonson, H. E
Pott, Percival]


Burden, F A.
Hope, Rt. Rt.. Hon. Lord John
Price, David (Eastlet)


Carr, Compton (Barons Court)
Hornby, R. P.
Prior, J. M. L.


Carr, Robert (Mitcham)
Hornsby-Smith, Rt. Hon. Dame P.
Prior-Palmer, Brig. Sir Otho


Cary, Sir Robert
Howard, Hon. G. R. (St. Ives)
Pym, Francis


Channon, H. P. G.
Hughes, Hallett, Vice-Admiral John
Quenneli, Miss J. M.


Chataway, Christopher
Hughes-Young, Michael
Ramsden, James


Chichester Clark, R.
Hutchison, Michael Clark
Rawlinson, Sir Peter


Churchill, Rt. Hon. Sir Winston
Iremonger, T. L.
Redmayne, Rt. Hon. Martin


Clark, Henry (Antrim, N.)
Irvine, Bryant Godman (Rye)
Rees, Hugh


Clark, William (Nottingham, S.)
James, David
Rees-Davies, W. R.


Clarke, Brig. Terence (Portsmth, W.) 
Jenkins, Robert (Dulwich)
Ridley, Hon. Nicholas


Cleaver, Leonard
Johnson, Eric (Blacktey)
Robinson, Rt. Hn. Sir R. (B'pool,S.)


Cole, Norman
Johnson Smith, Geoffrey
Robson Brown, Sir William


Cooke, Robert
Kaberry, Sir Donald
Roots, William


Cooper, A. E.
Kerens, Cdr. J. S.
Scott-Hopkins, James


Cordeaux, Lt.-Col. J. K.
Kerby, Capt. Henry
Sharpies, Richard 


Corfield, F. V.
Kerby, Capt Henry
Shaw, M.


Costain, A. P.
Kerr, Sir Hamilton
Skeet, T. H. H.


Coulson, Michael
Kimball, Marcus
Smith, Dudley (Br'ntf'd &amp; Chiswick)


Craddock, Sir Beresford (Spelthorne)
Kirk, Peter
Smithers, Peter 



Lagden, Godfrey
Smyth, Rt. Hon. Brig. Sir John


Crawley, Aidan
Lancaster, Col, C. G.
Spearman, Sir Alexander


Crosthwaite-Eyre, Col. Sir Oliver
Leather, Sir Edwin
Spearman, Sir Alexander


Curran, Charles
Leavey, J. A.
Speir, Rupert 


Dalkeith, Earl of
Leburn, Gilmour
Stevens, Geoffrey


Dance, James
Legge-Bourke, Sir Harry
Steward, Harold (Stockport, S.)


d'Avigdor-Goldsmid, Sir Henry
Lindsay, Sir Marlin
Studhoime, Sir Henry


Deedes, Rt. Hon. W. F.
Litchfield, Capt. John
Summers, Sir Spencer


Digby, Simon Wingfield
Longbottom, Charless 
Tapsell, Peter


Donaldson, Cmdr. C. E. M.
Longden, Gilbert
Taylor, Sir Charles (Eastbourne)


Doughty, Charles
Loveys, Water H.
Teeling, Sir William


Drayson, G. B.
Lucas- Other Sir Hugh
Temple, John M.


du Cann, Edward
McAdden, Sir Stephen 
Thather, Mrs. Margaret


Elliot, Capt. Walter (Carshailon)
McLaren, Martin
Thomas, Peter (Conway)


Emery, Peter
Maelean,SirFitzroy(Bute&amp;N.Ayrs)
Thompson, Sir Kenneth (Walton)


Emmet, Hon. Mrs. Evelyn
Macleod,Rt. Hn. lain (Enfield, W.)
Thompson, Sir Richard (Croydon, S.)


Errington, Sir Eric
MacLeod, John (Ross &amp; Cromarty)
Thornton-Kemaley, Sir Colin


Farey-Jones, F. W.
McMaster, Stanley R.
Thorpe, Jeremy


Farr, John
Macmillan, Maurice (Halifax)
Touche, At. Hon. Sir Gordon


Finlay, Graeme
Maddan, Martin
Turner, Colin


Fisher, Nigel
Maginnis, John E.
Tweedsmuir, Lady


Fletcher-Cooke, Charles
Maitland, Sir John
van Straubenzee, W. R.







vane, W. M. F.
Ward, Dame Irene
Woodhouse, C. M.


Vaughan-Morgan, Rt. Hon. Sir John
Whitelaw, William
Woodnutt, Mark


Wade, Donald
Williams, Dudley (Exeter)
Woollam, John


Warder, David
Williams, Paul (Sunderland, S.)
Worsley, Marcus


Walker, Peter
Wilson, Geoffrey (Truro)



Walker-Smith, Rt. Hon. Sir Derek
Wise, A. R.
TELLERS FOR THE NOES:


Wall, Patrick
W oirlge-Gordon, Patrick
Mr. Ian Fraser sad Mr. MacArthur.

Question proposed, That the Clause stand part of the Bill.

Mr. Bellenger: When we were discussing the Amendment, I raised one or two questions of administration which apparently it was not appropriate to discuss on the Amendment. The right hon. Gentleman the Chief Secretary said that his hon. Friend the Economic Secretary would answer my questions later.
The point briefly is that when we have passed the Bill, Schedule A will disappear from our Income Tax law. All owners of property hitherto have had to declare the value of that property in their Income Tax returns and the net annual value under Schedule A was regarded as part of the owner's income. This part of his income will now cease to be assessable if the owner of property is the occupier. What is to be the method of ascertaining who is the owner-occupier?
Hitherto, the assessment of the value of property has been made by the fairly well defined machinery of the Inland Revenue valuer assessing what the property was worth, but now that there is to be no Schedule A, the occupier of the property, if he is the owner and not the tenant, will be relieved from paying tax on that property. What I want to know is what is to be the administrative machinery for ascertaining whether the occupier is the owner.
Different considerations arise if he is a tenant. The owner of the property will then become assessable under a new case, Case No. 8. It would be out of order to discuss Case No. 8 on this Clause, but I can well imagine that the machinery which the Inland Revenue would want to set up in order to get its tax from an owner who was not an occupier would be very intricate. It appears to me that it will be a Schedule D assessment and that the owner of the property will have to render a return, as he now renders a return under Schedule D, showing what his net profits are.
Once the Economic Secretary has cleared my question about the machinery which is to identify the owner-occupier, in later Clauses we can go on to discuss how we are to assess the owner of property under the new Case No. 8. In such a discussion there will be considerations which it would be out of order to discuss now.
5.30 p.m.
In short, what machinery will be adopted by the Inland Revenue to identify the owner-occupier? I hope that the method adopted will not be a cumbrous one. If the owner of a property has to produce the title deeds to the Inland Revenue to prove that he is in fact the owner-occupier, I suggest that the machinery will be extremely cumbrous. If, on the other hand, he merely has to make a declaration such as an Income Tax payer makes on his annual return that he actually owns the property, that will be very much simpler and he will not be troubled with having to seek professional advice to answer the questions which the Inland Revenue will have to put to ascertain whether the occupier is also the owner.

Mr. B. T. Parkin: I add myself to the list of mourners identified by the Chief Secretary, but I want to make clear what it is I am mourning.
Two things are happening in the operation of this Clause. First, owner-occupiers are to be relieved of Schedule A because it has been widely held in all parties that this was a desirable thing to do socially, but it is in fact a political intervention in a fiscal matter. Between last year and this the Treasury has decided that from its point of view it would be a tidy thing to do to scrap the machinery altogether because most of those who are owners, but not owner-occupiers, get assessed under Schedule D anyway, so they might as well use the machinery of that Schedule.
What I am regretting is that by throwing away that machinery we are throwing away something which we may well wish to recreate. I think that this is one more blow in the demolition of the notion of


stewardship in property which unfortunately, while the idea itself is strengthening in the mind of public opinion, is slowly being removed from the laws of this country. Several of the most important laws have been repealed within the last few years. I do not want to survey the whole ground since the days when, after the departure of King John, the young King Edward was brought to Stepney when Parliament was held in the Great Place there and was compelled to reaffirm not only Magna Carta but De Ordinatio Foreste. which we so regrettably repealed in the course of this Parliament.
The second thing I regret is that we are throwing away a weapon against one of the most serious factors in the housing problem, and one which I regret to say the Chief Secretary in his speech on the last Amendment seemed to brush off as unimportant, as though it could not be cured. He was referring to small owners who could not afford to maintain their properties.
One of the biggest single factors in the dilapidation of houses and the exacerbation of the housing problem has been the habit of bleeding capital by assuming that the whole of the rent constitutes income. The offenders are not so much great corporations, or big landowners, or spivs, or speculators, as the innocent offenders, the elderly ladies who have inherited a couple of houses—on the assumption by the testator that they would thereby be rewarded in their old age—and who leave the management of these properties in the hands of estate agents. The estate agents are never instructed to put on a squeeze for repairs to be done at an early stage when they could be done cheaply, with the result that the property becomes seriously damaged.
There is machinery to correct this kind of thing within the operation of Schedule A, but bit by bit it has become atrophied. There is an assumption that under Schedule A people will spend a fixed amount on repairs, and people who are advised and able to spend more thereby manage to escape a great deal of the rest of the burden of Schedule A. An instrument should be devised to reassert the principle that a person ought not to be allowed to bleed away capital

which is social capital and thus reduce the total amount of dwellings available to the community.
Secondly, a taxpayer ought to be allowed to regard as maintenance something which is all too often now treated as an improvement because it means introducing something into a house which ought to have been introduced 50 years ago. In other words, I think we ought to be able to introduce the principle that reconditioning a house to modern notions of amenities should not be treated as an improvement, but as maintenance, and that a way should be found of excusing tax on that kind of expenditure.
It will, of course, occur to hon. Gentlemen that many of these things could be achieved through the rating system, and that I must not argue now. I must argue as if it could be done within the framework of the Treasury and the collection of Schedule A, as indeed it could, but if the Economic Secretary thinks that some of the ideas I am putting forward would be better handled through the rating system, I hope that he will call the attention of his right hon. Friend the Minister of Housing and Local Government to these arguments so that they can be taken note of.
I want to see established the notion that the owner of property should be encouraged in every way to carry out arrears of maintenance which are now misguidedly called improvements. I want a window tax in reverse. One does not assume that an owner has in fact spent a certain percentage per annum on maintenance. I want to make him prove it. If, moreover, one is selective about the kind of improvements needed, one introduces a social responsibility. For instance, what could be sillier than to tax a man locally or nationally because he builds a garage, and to let off a man who clutters up the road? There must be some means of achieving that sort of improvement.
I should like to see a re-establishment of the notion of the difference between gross and net annual value, but not an automatic assumption that tax was payable only on net, and not an automatic granting of exemption from tax on all kinds of expenses on houses such as the building of hard tennis courts or something of that kind. I should like to see a penalty on the absence from the house


of any of the things required by local council byelaws or any of the amenities now regarded as standard by the Ministry of Housing and Local Government. In other words, a person would not get his payments reduced to net if there were no inside toilet; so much per cent. extra charged for an outside toilet; so much per cent. extra charged for a shared toilet; so much for the absence of a bath; so much for the different things which at any moment must be regarded as reasonably appropriate to the conditions of living in cities, and so on. These vary from city to city, and from area to area, and one would of course make allowances for this.
In other words, I want to see a flexibility brought back into this, and I want to see some means by which those who are so easily dismissed as being unable to carry out repairs are enabled to do so. It is possible now for local council loans to be granted for this purpose, but nobody puts the pressure on. Yet nobody stands at that Dispatch Box nowadays and pleads that, however impoverished a farmer may be, however unlucky he is with his harvest, however difficult it is to get local labour, he must be allowed to let weeds run riot over his ground and do damage in all directions.
A house which has fallen into avoidable decay or neglect is just as much a menace in a city as is a neglected field, full of weeds, in the countryside. We do not have to re-argue the social aspects of taxation in these days. The Treasury boys always tell us that we ought to do this in another way, but we do not take any notice of them because there are so many examples of the fiscal system being used to encourage developments or improvements which are of social value.
I greatly regret that the Clause embodies so basically the destruction of a piece of machinery which might have been brought up to date and improved, and used as a weapon in the campaign to get old houses restored, improved and maintained. I hope that before we part with the Clause we shall have an assurance from the Treasury that it has not tossed aside any idea of preserving the good things that could have stemmed from a proper implementation of Schedule A, and that those bits of machinery will be reintroduced into our system in some other way,

so that the campaign for a social recognition of the importance of maintaining property will be sustained.

Mr. McKay: I have lately acquired the art of getting out of order. On this occasion, I hope that I shall succeed in keeping within the rules of order. Most of us are in favour of the Clause in principle, but we see many weaknesses in it. We are seeking to give relief to people who are buying their own houses. In fact, the agitation for such a Clause as this has been strengthened because so many so-called owner-occupiers are having a great struggle to make ends meet. They are ambitious to have a house of their own, but they nevertheless knew that they were creating for themselves a problem which might overcome them in the end. It was because of the problem facing these people that the Clause was finally brought into the Bill.
Unfortunately, the hardest-hit owner-occupiers, whose situation was responsible for the introduction of the Clause, are getting no real advantage from it, because they are so low in the income scale that they do not have to pay any Income Tax. Other owner-occupiers, living in more comfortable houses of greater value, have up to 10 times the income of the ordinary workers at the lower end of the scale. That means that this is another piece of invidious legislation which is really helping those in the higher income groups.

The Temporary Chairman (Mr. F. Blackburn): If the hon. Member proceeds with this argument he will become out of order. If he will think over what he has been saying he will realise that he has been introducing a number of matters which are not contained in the Clause.

5.45 p.m.

Mr. McKay: I do not see that. At the same time, I must obey your Ruling, Mr. Blackburn. I understand that the purpose of the Clause is to help various classes of owner-occupier. If it is not being introduced for that purpose, what is it for? My point is that the Clause seeks to provide some relief for those people who are paying off mortgages on their houses, which will eventually become their own property. Surely that is what I have been saying.
But although the Government are seeking to provide this help, in fact


many owner-occupiers will receive no relief at all. Furthermore, ought we not to consider the position of another section of the population, which does not consist of owner-occupiers? If we are going to provide some relief for owner-occupiers we ought also to remember those people who are paying rent for their houses. Cannot we do something for them?
The Government ought to take the view that now that owner-occupiers are being helped it is necessary also to be fair to the greater number of householders who pay rent, and to see that in future legislation housing subsidies are increased in order to help those people.

Mr. Graham Page: I ask my hon. Friend to answer two points. Subsection (1,b) provides for the charging of rents and certain other receipts from land under a new Case of Schedule D. Why is it necessary to have a new Case, when, under Case VI, excess rents are at present chargeable? When one reads the following Clauses it appears that Case VIII has been devised in order to deprive the taxpayer of certain rights which he has under Case VI. I will not go into details because the matter arises in later Clauses. But if we had an explanation from my hon. Friend at this stage why it was decided to have a new Case instead of making the rents chargeable under Case VI, it would assist us in understanding and debating the following Clauses.
Is it intended that the returns under this Case shall be made on the ordinary form? In respect of Schedule A we made returns of maintenance, repairs and so on to the inspector of the district in which the property was situated. Under Case VIII is it all to go on the one return? Or are we to make returns of rents and profits from rents to the inspector in the district in which the property is situated? It is a machinery point but an explanation of how Case VIII is to be administered would assist us to understand the later Clauses and Schedules.

Mr. Bence: It has been said that the abolition of Schedule A tax represents a tremendous step forward in devising means to assist potential owner-occu-

piers and young people wishing to buy their own home. I always considered that this tax was nonsense. As an owner-occupier, or rather as one who for many years has been paying a mortgage in order eventually to acquire his own house, I have been able to avoid paying any Schedule A tax by reason of the mortgage payments which I have to make and the ground rent and feu duty which I have to pay.
Few occupiers of modest homes are called upon to pay a considerable sum in this form of taxation. It may amount to £1 or £2 a year. But the psychological effect of its abolition will be to encourage owner-occupation, because owner-occupiers will consider that they have been relieved of an iniquitous form of taxation. The tax was levied on a notional rent for which no income was received. In fact, people lost a source of income because, had they invested their money in something other than a house, they would have received a financial return upon which, of course, they would have had to pay tax. I think it desirable that as many people as possible who can afford to do so should own their own homes.
There are a number of owner-occupiers who open their property to visitors and charge visitors half-a-crown each. There is a famous mansion somewhere in Bedfordshire. It is a beautiful home where there are juke boxes, and all the rest of it. There are all sorts of sideshows in the grounds. Does the owner escape the payment of tax, or will he be taxed? I presume that the huge mansion in which he lives is his home. No doubt it is expensive to maintain. It may be an architectural gem—I do not know because I have not visited it. But I think that the owner is doing pretty well. Does he escape the payment of tax on the property which to me has the appearance of being more of a business enterprise than a domestic residence? Do the occupiers of such properties escape the payment of tax?
I support the Clause and I consider that its provisions are desirable. I hope that the burden on owner-occupiers will be still further reduced by more concessions to building societies.

Mr. Houghton: It would, I think, be a pity to dismiss Schedule A "in disgrace", because it has been a perfectly respectable


tax. It has been embodied in the Income Tax Acts for over a hundred years. It annoys me to hear Ministers say that Schedule A was a very unsatisfactory tax and that they never believed in it. They are like Stalinists who have become followers of Khrushchev who denounce the deviations of their former chief. It was only on 21st June, 1960. that the then Chancellor of the Exchequer, now Lord Amory said in this House:
While the arguments of the Royal Commission are pretty conclusive on the propriety of taxing notional income of this kind and on the relative equity as between a person who owns his own home as against one who rents his I find the argument in favour of special discrimination as an incentive to house ownership an appealing one."—[OFFICIAL REPORT, 21st June, 1960; Vol. 624.]
It is on that basis only that the Committee should accept this Clause. It is important that it should be done in this way because, in a subsequent part of his speech in 1960, Lord Amory acknowledged that there were strong arguments both for and against relief from Schedule A tax for owner-occupiers. The proposal has come in Clause 14, after consideration of the social aspects of the tax and its incidence and impact on those trying to buy their own homes, many of whom are handicapped by high prices and high mortgage interest rates.
We must remember, however, that not all owner-occupiers are buying their houses by means of a mortgage. There are nearly 7 million owner-occupiers, and fewer than 2½ million are buying their houses by means of mortgages from building societies. Some are buying their houses by means of insurance policies, but I do not know how many. It is within the knowledge of all of us that a great many owner-occupiers do not have to struggle with problems arising from the payment of mortgage rates and the high interest charges. I do not wish to develop the point further. In saying "Goodbye" to Schedule A, I should like also to say, "Long life to Case VIII", and to acknowledge what I think is the proper basis upon which the Committee should approve this concession.
We must not overlook the large number of people who are buying their houses on mortgage and who have family responsibilities, but whose incomes are so modest that they pay no Income Tax at all. Those people receive no benefit from

this Clause, though, to be fair, there are provisions in other Clauses in the Bill which will assist them in other ways.
As my hon. Friend the Member for Wallsend (Mr. McKay) said, millions of people who are paying rent get no relief under Clause 14. We have to remember them because when they have done paying through the nose, as many of them are doing, they will not have a capital asset such as the owner-occupier will have. Still less will they have a capital asset of appreciating value as many owner-occupiers have. When I heard the Chief Secretary referring to some "modest person" who had a small mews cottage, I wondered if the right hon. Gentleman had been looking at property advertisements recently. Does he know what a small mews cottage costs? It costs £25,000—[HON. MEMBERS: "More."]—and many of them of cost more. They were bought for £7,000 a few years ago.
I know that this is distasteful to hon. Members opposite and there is no political capital in it for me, so I do not propose to continue these remarks any longer. I think, however, that in this Committee, whatever the political situation, occasionally the truth should be told.

6.0 p.m.

The Economic Secretary to the Treasury (Mr. Edward du Cann): We have listened to a most engaging speech on which I am quite sure the hon. Member for Sowerby (Mr. Houghton) will not expect me to comment in detail. Indeed, in view of the fact that we have had a long debate, not only on this Clause but on the Amendments proposed to it and also on the whole subject of Schedule A, I imagine that it would be the wish of the Committee that I should be fairly brief while still attempting to reply to specific questions which hon. Members have asked me.
The purpose of this Clause is to abolish Schedule A on all owner-occupied property and to bring rent within a new Case of Schedule D. As the hon. Member for Sowerby might have said, "Le roi est mort. Vive le roi", although, as my right hon. Friend pointed out, he came here this afternoon to bury Caesar and at the same time to praise him. It may have been to resurrect him, and


that would be a cleverer thing to do, I imagine.
There will be a great deal of rejoicing that. Schedule A is to go. This was foreshadowed by my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) last year and it has been brought to fruition by my right hon. Friend the Chancellor now. There has been very much pressure for abolition of Schedule A. I am particularly glad to see my hon. Friend the Member for Crosby (Mr. Graham Page) in his place. He has been prominent in that regard, as have other hon. Members, particularly the hon. Member for Westhoughton (Mr. J. T. Price) who is not here at the moment.
The cost of abolition is £35 million this year and £48 million in a full year; expensive but, I am perfectly certain, worth it on social grounds, as the hon. Member has suggested. I was a little confused when listening to the hon. Member for Wallsend (Mr. McKay). I was not quite clear whether he thought the move towards home ownership a desirable or an undesirable thing. I personally think it a thoroughly desirable move which should be encouraged.
I have been looking at the figures. It is very interesting to see the change which has taken place in our social scene in recent years. In 1920 there were 8·9 million dwellings in the United Kingdom of which 1·9 million were occupied by owner-occupiers—21 per cent. By 1939 the figures were respectively 12·6 million in total with 2·9 million owner-occupiers —23 per cent. The figures for 1963, in so far as one can estimate them—and these are all estimates; it has not been possible to get precise figures—are 16·8 million dwellings in the United Kingdom and 6·8 million by owner-occupiers—40 per cent. Here is the trend, which I think thoroughly satisfactory in the national interest.

Mr. Mitchison: Will the hon. Gentleman answer a question which has been puzzling me a little? We have in the White Paper what I presume are the figures resulting from a tax concession by the abolition of Schedule A reduced by a tax gain out of the proceeds of Case VIII. Could the hon. Gentleman give us the figures separately? I hope I have made myself clear.

Mr. du Cann: The hon. and learned Member has made his question entirely clear. I am not in a position, however, to give him accurate figures at this moment, I am sorry to say, nor do I think it would be possible to estimate them accurately at present. Any estimate would involve a very great deal of work. Quite apart from that, I think it would be impossible to get precise figures. I follow what the hon. and learned Member wants, but I regret that it is not possible to get it.
The hon. Member for Sowerby said that we had had this tax for a hundred years and it had worked very well. I suppose it would be accurate to say that one could trace the ancestry of the tax as far back as Tudor times. Whatever the truth of that, I and, I think, all my hon. Friends and many hon. Members opposite believe that we are very well rid of it, even though we do not get rid of it in disgrace—I agree with the hon. Member to that extent.
The hon. Member for Paddington, North (Mr. Parkin), as I understood his argument, was very much in favour of abolishing Schedule A, as are other hon. Members, but he was arguing for greater reform of taxation in general. He instanced several ways in which he would like to see those reforms developed. He asked whether we in the Treasury had closed minds. I think the exact phrase he used was that thinking on further reform of taxation was desirable for social reasons. He hoped that we would not toss aside a good idea. Certainly we do not toss aside any good ideas and we shall pay attention to his remarks. I do not say that we agree with him on all of them, but we are far from being static in these matters in the Treasury.
My hon. Friend the Member for Crosby asked why we had a new Case VIII. I think that the answer would properly be given during debate on Clause 15 and my hon. Friend the Financial Secretary will provide it then. My hon. Friend the Member for Crosby also asked about the machinery. That I suggest would be properly answered in discussion of Clause 16, and again the Financial Secretary will provide the answer. The hon. Member for Dunbartonshire, East (Mr. Bence) asked a question which related to the Fourth Schedule, 11 (2, c). My hon. Friend the Member for Nottingham, South


(Mr. W. Clark) has an Amendment on the Notice Paper on that point. Perhaps the hon. Member for Dunbartonshire, East, will await a specific reply until we debate that Amendment.
The right hon. Member for Bassett-law (Mr. Bellenger) asked about several things, in particular if we could define "owner-occupier". We all use the phrase. It appears in the side note to Clause 14 and I have used it already in winding up this discussion. It is not a very good phrase to use. The public understand it and we understand it, but it is extraordinarily difficult to define. The right hon. Member will see that nowhere does that expression appear in the Clause, but we talk about the occupier with a beneficial interest. That can mean either a freeholder or a leaseholder.
The position is that it is the occupier who is assessed for Schedule A and who pays it. He passes it on to his landlord to the extent that he can deduct tax at standard rate from rent. The right hon. Member will know that there are certain limitations on that. A freeholder cannot pass it on at all. The holder of a long lease may be able to pass it on to a limited extent only if his ground rent is small. A leaseholder with a shorter lease may be able to pass it on if his rent is higher. I am reminded of what the Frenchman said—that no one can define an elephant but we all recognise him when we see him. I hope that the right hon. Gentleman will be satisfied with that reply. Even though the definition is not easy to put in layman's language, I think that there is no difficulty, because the position is well understood in law.

Mr. Bellenger: I am not in the least satisfied. I am not concerned with what we know when we see them but with what the tax inspector will know before he exempts the property from Schedule A tax. If the occupier is a tenant, he pays and then passes it on to his landlord, but if he is a beneficial occupier under a lease or a freehold, then he is exempt from tax. How will the Inland Revenue find out whether the property occupied by an hon. Gentleman apposite or myself, for example, is owner-occupied? It may be a well-understood term for lawyers and the Inland Revenue,

but how will they know which house is owner-occupied or beneficially occupied?

Mr. du Cann: I very much admire the right hon. Gentleman's persistence. He has tried to screw me down hard on this matter. But he interrupted me just as I was about to develop the matter further. I wanted first to deal with the question of definition and then to turn to the question which he asked—and to which he has now directed extra attention—that of machinery. Again, this would be more appropriately discussed under Clause 16. and this will be done.
I would say to him that, in general, however, we can foresee no difficulty whatever. The Inland Revenue will require returns in the usual way. We are satisfied that the matter will work as smoothly as it did in the old days, even though we are operating a new Case. We can see no problem. But my hon. Friend the Financial Secretary is only too ready to discuss the matter with the right hon. Gentleman when we discuss the Clause which deals with this case.

Mr. Bellenger: The hon. Gentleman has misunderstood me. The Clause which will be discussed later is the Clause under which rents are being received by the occupier or owner. I am concerned with the case of the individual living in a property. The Inland Revenue has hitherto assessed the tax on the hereditament and has gone to the occupier and said "Pay up. Whether you can pass it on or not is nothing to do with us". Had the Revenue wanted to levy distress it would have levied it on the property. What I ask under this Clause is: having abolished Schedule A, how will the Inland Revenue identify who is entitled to that concession?

Mr. du Cann: I do not altogether follow the difficulty which is in the right hon. Gentleman's mind, because if an owner-occupier is not in receipt of income from property he does not have to declare it and there will be no Schedule A for him to pay. It will be as simple as that. We foresee no difficulty. I hope that the right hon. Member will accept it from me that we think that there will be no trouble.
May I pass, very shortly, to more general matters? The proposals con-


tained in the chapter, for which this Clause is, so to speak, the starting gun, represent, as the hon. and learned Member for Kettering (Mr. Mitchison) said, a new and far-reaching change in the tax structure. This Clause does not deal with the detail of the matter. Clearly it must follow in an important and complex sector of the tax field such as this that there will be a chain reaction from the major decision to abolish Schedule A tax which is contained in the Clause. It is therefore followed by 19 Clauses and four Schedules, a very substantial amount of legislation to wade through during the rest of the day. But it is these detailed matters, as indicated by the questions of my hon. Friend the Member for Crosby and others, which are of the greatest interest to the Committee. Certainly any substantial move in tax matters obviously merits careful study.
I want to make it plain on behalf of my right hon. Friend that the Government will welcome discussion of the details of these succeeding Clauses and Schedules. The Committee stage, I am sure, will be valuable to us as hon. Members are good enough to give us the benefit of their informed advice. We are ready to give a general undertaking to beat in mind and to consider with care any suggestions which are made for the improvement of any item. I am not, of course, undertaking that my right hon. Friend will accept every or any suggestion which is made to him, but we are very ready to examine the ramifications of the Chapter with care and with the help of the Committee.
6.15 p.m.
The hon. Member for Sowerby the day before yesterday made a suggestion that it might be for the Committee's assistance if a short explanatory statement were sometimes made at the beginning of our discussion of each Clause. We are entirely ready to accept this helpful proposal in respect of the Clauses in Chapter II in appropriate cases. My hon. Friend the Financial Secretary or my hon. and learned Friend the Solicitor-General or I, unlearned, as appropriate, wilt certainly, where the context appears to require it, preface the discussions which we may have on the Clauses in Chapter II by a few short explanatory words. We trust that this arrangement

will meet the wishes of hon. and right hon. Members opposite and will be helpful to the Committee in general, as, indeed, is our intention.

Mr. Mitchison: Will the hon. Member extend that undertaking to Schedule 4, which is a most difficult part of the Bill. I personally—and I think that I speak for hon. Members on both sides of the Committee—would be glad if a statement of that sort were made before we discussed it. I observe the hon. Member nodding in agreement.
May I ask him a second question about the cost of this concession following the question which I asked him a moment ago? I appreciate the difficulty of giving the figures, but does he know, or will he ascertain for me, what would have been the yield of Schedule A if it had not been abolished—the figure from which the value of the concessions would be deducted?

Mr. du Cann: The hon. and learned Gentleman appreciates that there are Amendments to Schedule 4 which will have to be dealt with first, but my hon. and learned Friend the Solicitor-General heard the hon. and learned Gentleman's suggestion and he authorised me to say—as no doubt the hon. and learned Gentleman observed—that he will do his best to meet the point.
The hon. and learned Gentleman will understand that I cannot give him now, while I am on my feet, the figures for which he asked, but I will do my best to see whether I can satisfy him before we conclude our discussions on these matters.
We had our legs pulled a little—I do not complain of it; it was done very fairly and, as always, very pleasantly—by the hon. Member for Sowerby, who suggested that perhaps we have not been altogether consistent in this matter of Schedule A. That may or may not be so. But, as I mentioned earlier, personally I am glad to be rid of it, and so are my hon. Friends. It is a step forward in a move towards a property-owning democracy. I know that the vast majority of hon. and right hon. Gentlemen opposite similarly welcome it.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 15.—(CHARGE TO INCOME TAX OF PROFITS AND GAINS ARISING FROM LAND.)

Mr. William Clark: I beg to move, in page 12, line 36, at the end to insert:
or in such other period as the Commissioner may direct".
The subsequent Amendments, I fear, will be fairly complicated, but I am glad to say that this is simple. Under Clause 15(2) as drafted the Inland Revenue must take the whole of the income from property for the fiscal year and there is no means whereby the taxpayer can have a different basis from the 31st March to 5th April accounting dates. By concession of the -Inland Revenue, under Case VI at present, people in this category are allowed to take their normal accounting year as the year of assessment.
I hope that my hon. Friend agrees that this is a simple and small point, even though I regard it as important. I suggest that in the case of a company or an individual who owns property, the accounting year should be sufficient for his declaration of income and that it should be under this Clause exactly the same as under Case I, Schedule D.

Mr. Graham Page: I support my hon. Friend the Member for Nottinngham, South (Mr. W. Clark) on one point, which I think strengthens his argument. The charge for furniture and services is in a later Clause kept under Case VI. If under Case VI the taxpayer is allowed to choose his year, it will cause a certain amount of confusion if for the services and furniture charge he chooses one fiscal year and for the rent he has to choose the normal fiscal year. This shows one of the confusions which will arise out of the retention of Cases VI and VIII. I am sure that if the words in the Amendment were added to the Clause it would remove that sort of confusion.

The Financial Secretary to the Treasury (Mr. Anthony Barber): Subsection (2), as it stands at present, provides that Case VIII assessments on a landlord shall be based on the amount of the rents and other receipts from land to which he is entitled in the year of

assessment—that is to say, in the year ending 5th April. The Amendment would allow an assessment to be based on a period other than the year of assessment, where "the Commissioner", as he is described, which presumably means the Commissioners of Inland Revenue, so directs.
I can see that this Amendment is very relevant to the case of a property company which, as I understand, in the past has been assessed on the basis of its accounting year. It is suggested that Case VIII assessments on such companies should also be made on the basis of the company's receipts and expenditure in its accounting year. It is true that in practice the accounting year has frequently been adopted as the basis for excess rent assessments under Case VI in cases of this kind.
I can see the force of the argument advanced by my hon. Friend the Member for Crosby (Mr. Graham Page). It will obviously be more convenient, both to the taxpayers concerned and, I have no doubt, to the Revenue, to be able to adopt the company's accounting year as the basis for Case VIII assessments in appropriate cases. But no doubt in the ordinary way a small individual landlord will continue to be assessed on the basis of his receipts in the Income Tax year, as indeed has been done when making excess rent assessments in such cases in the past.
I certainly think that my hon. Friend the Member for Nottingham, South (Mr. W. Clark) has a point here, but I hope he will understand when I tell him that I cannot accept the Amendment as it stands. It does not, as I think it should do, restrict the period which may be adopted to a period of 12 months ending within the year of assessment. Nor does it specify which Commissioners—the Commissioners of Inland Revenue or the local Commissioners—should have the power to determine what period should be adopted. Having said that I think my hon. Friend has a point, I am bound to say that there are certain other difficulties, with which I will not weary the Committee at this stage, if my hon. Friend will pardon me, about drafting an Amendment to do what he intends. However, I have every sympathy with the objective he has in mind. We will certainly do our


best to try to meet it. If we can meet it, of course we shall table an Amendment on Report. I hope that in these circumstances my hon. Friend will not press the Amendment.

Mr. Mitchison: One small point occurs to me. I recognise that this is existing practice, but it is, as I think the hon. Member for Nottinghamshire, South (Mr. W. Clark) pointed out, in fact a concession. I do not think that there is any authority for it in the Income Tax Acts. I stand to be corrected about that if I am wrong. If one puts half a concession on paper, may we not get into difficulties about the other half. That which is conceded as a matter of practice could perhaps continue to be conceded as a matter of practice. Once we begin to say that it shall be done in some cases, we may by inference leave it doubtful whether it will continue to be done in others. I merely mention this. It is no objection in principle to what the hon. Gentleman has mentioned and what the Government have accepted. Obviously one will have to consider who the right authority—at present designated as "the Commissioner "—is.

Mr. Barber: Perhaps I might mention that there is also a statutory provision in Section 101(7) of the Income Tax Act, 1952 to this effect—
In computing the five-year average for the purposes of this section, the year shall be taken to be the year ending on the thirty-first day of March, or such other date as may be adopted by the owner of the land or houses with the consent of the surveyor of the district …
I think, without checking it, that the hon. and learned Gentleman is correct that the practice of assessment under Case VI by reference to the accounting year of a company is mere practice. Certainly this is a factor to be taken into account in ensuring that there are not repercussions from any Amendment which we might table. I would merely say that this is a point which we should like to meet if we possibly can, and we will certainly do our best to achieve that end.

Mr. W. Clark: I apologise to my hon. Friend the Financial Secretary for the very loose wording of the Amendment. I am very grateful to him for accepting it in spirit In view of what he has said,

I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Question proposed, That the Clause stand part of the Bill

Mr. Barber: In order to honour the pledge given by my hon. Friend the Economic Secretary, perhaps I should say at the outset that this Clause provides that rents and other receipts from land in the United Kingdom are to be charged to tax under Schedule D under the new Case which we have been discussing, Case VIII. The tax will be charged direct on the landlord instead of partly by assessment under Schedule A, which is normally made on the tenant, who, as my hon. Friend pointed out on the previous Clause, is entitled to deduct the tax from his rent, and partly by an excess rent assessment on the landlord under Schedule D, as at present. Case VIII assessments will be on a current year basis—that is, on the actual receipts, less the actual expenses of the same year.
By virtue of Clause 14(2) and Clause 20(1), the provisions of this Clause do not take effect until the year 1964–65. The reason is a simple one. It is that the staff in tax offices could not cope in one year both with the other changes instituted by the Finance Bill, in particular the P.A.Y.E. re-coding of 5 million owner-occupiers which is necessary in consequence of their being exempted from tax under Schedule A, and with the introduction of a new system for the taxation of rents and other income from real property. Much preliminary work will have to be done in this year—1963–64—to enable the transition to be carried out, I hope smoothly, in the following year.
My hon. Friend the Member for Crosby (Mr. Graham Page) asked why we had decided to operate this new system under a new Case VIII rather than under Case VI. As I have said, in the past, tax in respect of rented property has been assessed both under Schedule A and also under Case VI where there were extra rents to be taxed. There was a great mass of special rules which were applicable to Schedule A. As Schedule A is now going, we have had to replace it with other rules which will be in some cases exclusively concerned with rents and analagous income.
Because of this, we thought that in the course of abolishing Schedule A it would be more convenient for all concerned if we included these new rules in a new Case VIII rather than in Case VI, which is the residual Case of Schedule D. The answer to my hon. Friend, in short, is simply that we thought that this was the more convenient way to do it. We had to lay down these new rules, which are set out in these 19 Clauses and a number of difficult Schedules, so we thought it best to have a new Case.
Much of this Clause is self-explanatory. I have tried to give the Committee the gist of it. If there are any special points which hon. Members would like me to answer, I will do my best to do so.

6.30 p.m.

Mr. W. Clark: Would my hon. Friend comment on subsection (4), which penalises a person letting furnished accommodation with services—which at the moment is assessed under Case I of Schedule D—from getting earned income relief? Since that income is being put into Case VI of Schedule D it will not rank for earned income relief. This would seem to be against the principle which the Government are trying to put forward in regard to Schedule A. I am not sure, but I think that it was never envisaged that this legislation should penalise anyone who now comes under the new Case VIII.

Mr. Barber: I cannot give my hon. Friend an answer to that point without further consideration, although it is perfectly true that in certain cases, throughout these provisions in Chapter II, not everyone will find that they are better off or in the same position. A certain number of taxpayers here and there will find that, to a marginal extent, they have to pay slightly more tax. The main point of subsection (4) is to provide for rents of furnished lettings to be wholly chargeable under Case VI, unless the landlord requires the rent proper to be charged under Case VIII.
I understand, further inquiries having been made, that it is intended that the position will stay as it is. I agree with my hon. Friend that it seems unlikely that that will be the result under the Clause as at present drafted, but as to whether or not it will require to be

altered, I will consider the point my hon. Friend has made to ensure either that it is covered at present or that an Amendment to the Clause is put down if required.

Mr. W. Clark: Am I to understand that if people are going from Case I to Case VI a suitable Amendment will be tabled by the Government on Report?

Mr. Barber: All I can tell my hon. Friend is that it is certainly not our intention, in those circumstances where there has been a Case I charge in the past, that those taxpayers should now be taken out of Case I. How that is to be achieved I am not quite sure without further consideration; but certainly that is not our intention.

Sir Eric Errington: I wish at this point to raise a practical question about the actual payments to be made under the proposed Case VIII. One of the most annoying things is that at present under Case VI, charging excess rents, for one receives an intimation of liability when a lot of properties are concerned before the liability has been settled. One must then appeal against the assessment some months before it is possible to arrive at the true amount—that is, if there are certain changes in regard to the properties—if the property is either void or otherwise.
I should like to be satisfied that under Case VIII the liability is arrived at and that that liability will be for payment of Income Tax at the beginning of the following year and not, as now exists, under Case VI. Under Case VI there is often a notional liability which requires adjustment and which involves an immense amount of paper work. It is at present dealt with by the experts in these matters who send in a pink appeal form which in effect puts the whole amount in issue. I hope that we will get away from the automatic appeals against assessments and come to the position where the exact final liability is arrived at, and payment made after that has been decided.

Mr. John Diamond: I rise to give the Financial Secretary a little more time in which to discover what he wants to tell us, because at present we are all in a complete fog. It is, perhaps, easier for me to say that than it is for the hon. Member for Nottingham, South (Mr. W. Clark).

Mr. W. Clark: I am not in a fog. I know what my hon. Friend said about Case 1 and Case VI.

Mr. Diamond: May I say that I am in a fog?

Mr. Clark: Yes.

Mr. Diamond: By the time I am finished I hope that the hon. Member for Nottingham, South will realise that there is a fog around which may envelop a great number of hon. Members. I do not wish to be difficult about this; I merely want to give the Financial Secretary more lime to make inquiries so that we may be clear about this matter.

Mr. Barber: I intend to clear it up.

Mr. Diamond: Subsection (2) states:
Tax charged under Schedule D by virtue of this section shall be charged under a new Case VIII…
which, presumably, includes all amounts of profits and so on and is not limited to the rent being received but to the income in respect of services and other things going with it—the boiler, heating, cleaning and a variety of things that may be related to the rent. All sorts of things can sometimes be included in the rent, sometimes paid separately and sometimes a varying figure. Varied though they may be, they are almost always covered under the terms of the lease. As I say, we are told that the
Tax charged under Schedule D…shall he charged under a new Case VIII..
and subsection (4) states:
notwithstanding anything in subsection (2) …
to which I have referred, and it continues:
…where rent is payable under a lease tinder which the tenant is entitled to the use of furniture or to services.…
Here we have mention of the services to which I referred
…tax in respect of the rent (as well as in respect of the payment for the use of the furniture or for the services) shall be chargeable under Case VI of Schedule I) unless the landlord…requires that the rent shall be charged under Case VIII.
The rules are different, or they may be different in certain respects. Surely there are assessments now under Schedule D and not under either Case VIII or Case VI. Thus we really have three eases to consider; the first is where it is being

assessed under one case—where it will be assessed unless notice is given—and the other where the case will be assessed when notice is given. It may be one or the other, or, conceivably, a combination of both—which gives us the third ease. I am glad to say that so far the hon. Member for Nottingham, South, whose knowledge in these matters I respect, is, I think, with me.
For these reasons, it is important for us to know whether or not this will remain the position—if that is the Government's intention—or whether the Government propose to alter the position and suggest something different and, perhaps, a great deal more simple. It is not simple, for example, when one deals with a very regular form of income—services in connection with the use of the premises, a form of income which, I would remind the Financial Secretary, is not simply calculated but which must be calculated not only by reference to the gross income but to expenses properly deductable in earning it.
A charge for cleaning, for example, by a landlord is not simply what the landlord receives for the cleaning but what he receives, less what he paid out, which may be less equal to or greater than a given figure. The question of profit or loss arises as well as that of income. We should know whether it will be assessed under one or other of the new arrangements and is not simple to have it all assessed under one Schedule, unless one is giving notice and requires it to be assessed under one case or the other.
I think that I am not altogether wrong in this and that the matter is by no means simple and straightforward as the Clause is at present drafted. We are making rules. Let us have them as clear as possible. If the Government are now saying that they are not certain that the present position is what they really want, and that they want another situation, we should know all the details of what is in their mind so that the matter can be fully considered.
One of the reasons why I am on my feet is that I wish to give the Financial Secretary ample time in which to discover the facts so that he can give us a satisfactory answer. I hope that the hon. Gentleman is receiving some assistance from those who are here to help the Government Front Bench. As I say, I am on my feet


to allow for the passage of a reasonable amount of time so that the Financial Secretary can gather the necessary information on how the Clause will work in its final form.

Mr. Barber: The hon. Gentleman is very understanding. I shall try to deal with the two points raised, first, by my hon. Friend the Member for Aldershot (Sir E. Errington), and then by the hon. Gentleman.
My hon. Friend asked when the tax would be due under the new Case VIII. As he will see, the conjoint effect of Clauses 15 and 16 is that the assessment is made on the basis of the current year, but necessarily by reference to the profit of the previous year and the rents and expenditure of the previous year. There is an Amendment which my hon. Friend has put down, which we shall be considering in connection with Clause 16, to deal with the case where the circumstances of the taxpayer change in the year. Perhaps I may leave comment on that aspect until we come to the Amendment.
On the point raised by the hon. Member for Gloucester (Mr. Diamond), I quite recognise that many of the provisions in Chapter II are complex and take a considerable amount of understanding, but obviously, as he knows, they have not been drawn up in a complicated fashion because we wanted them to be complicated. In many cases they are complicated because we wished to be fair and do what we thought was the right thing by the taxpayer. I think that Subsection (4), to which he has specifically referred, is just such a case.
In Subsection (2), besides giving the new case the label of Case VIII, we are providing that the tax shall be charged by reference to the rents or receipts to which the person becomes "entitled"—it is an important word in this context—in the year of assessment. All that we are doing here is preserving the present basis of assessment under Schedule A, which is technically a current year basis, although the fact that revaluations have been made only at intervals of five years, and not at all, I think, since 1935–36, have made it far from that in practice. The anomalies, as I think the hon. Gentleman will see, follow where the recipient's liability is affected. Where the1

rents fell temporarily into arrears, for example, his Surtax liability might be increased, or his rents might be received in a year when the standard rate of tax had been altered. That is the reason for the reference to entitlement, which I pointed out a few moments ago.
Subsection 4 provides for rents for furnished lettings to be charged wholly under Case VI, unless the landlord requires the rents as distinct from the payments for the use of furniture and services to be charged under Case VIII. The reason why it is possible for the rents to be charged under two cases, either Case VI or Case VIII lies in the interests of the landlord. He is given the option because it may suit the landlord in a particular case to be charged under Case VIII in order to take advantage of the provisions in the Fourth Schedule under which excess expenditure on one property assessed under Case VIII can be set against income from another property assessed under that case.
On the other hand, where rents are paid for furnished lettings, it may be that it is convenient—indeed, I would have thought that it would be in the normal case for both taxpayer and Revenue—to charge the whole payment in one assessment under Case VI. Here again it would, of course, have been quite easy to specify one particular case and to leave it at that, but we thought it right to give the landlord the option because it may be to his advantage.
I hope that I have had said sufficient to explain to the hon. Gentleman why there are these three Cases involved, Case VIII, Case VI and Case I, which was referred to earlier on on this same Clause.

6.45 p.m.

Mr. Mitchison: I am sorry to take up the time of the Committee, but' it will be remembered that in a previous discussion we were told that a grave objection to proposals we made by way of amendment was that they woud mean the continuance of assessment under Schedule A. I am rather puzzled as to what will happen, for instance, in such cases as Section 175 of the 1952 Act. This relates to the taxation of excess rents of immediate lessors arising under


certain short leases. The effective provision is subsection (1) that the immediate lessor
…shall be chargeable to tax under Case VI of Schedule D in respect of the excess, if any, of the amount which would have been the amount of the assessment of the unit for the purposes of Schedule A, as reduced for the purpose of collection.…
I looked at the Schedule to see whether this had been repealed. Apparently it is not in the list of repeals. There may be an Amendment somewhere which answers the matter. Otherwise, one wonders what will be the basis of assessment in the future—whether it is to remain as it is at present, and, secondly, whether, if so remaining, it does not lead to the continuance of that to which the Chief Secretary took such objection in Schedule A machinery.

Mr. Barber: It is not easy when one is looking at these Schedules of repeals, which occupy a considerable number of pages, to find a particular point without any notice whatsoever. As far as I know, all the necessary repeals are set out in the Schedule to ensure that in the future the assessment of rents will be under Case VIII and not, as previously, under the Schedule.

Mr. Graham Page: If the hon. and learned Gentleman the Member for Kettering (Mr. Mitchison) had read the Schedule properly he would have seen that on page 90, lines 48 and 49, it repeals Sections 172 to 179. If my mathematics are right, 172 to 179 includes 175.

Mr. Mitchison: I am sure that the hon. Member's mathematics are perfectly right, and I am much obliged for the reference. That leaves the other part of my question unanswered: what is going to be done by way of assessment in these cases now?

Mr. Barber: Is the hon. and learned Gentleman talking about excess rents?

Mr. Mitchison: Yes.

Mr. Barber: In future, the new Case VIII will replace both the assessment under Schedule A, which is normally on the occupier, and the assessment under Case VI of excess rents, which was on the landlord. In future, Case VIII assessment will replace both those and will be made on the landlord. One would look at the gross rent he received and at expenses

in accordance with Schedule 4 and the net result would be the amount on which he would pay tax.

Mr. Diamond: We are grateful for what the hon. Gentleman has just said about excess rents, but what he has not said is whether the Clause as it now stands is or is not the Clause that he wants in the Bill. The hon. Gentleman is about to ask us to pass the Clause, because that is the Question which will shortly be put to us. We can see what is on the Paper and what is in the Bill, but we do not know what is at the back of the hon. Gentleman's mind, or rather in the mind of the Parliamentary Private Secretary, because, as we know, in these things Parliamentary Private Secretaries have sources of information which are not open to those who sit on the Government Front Bench. I should be grateful, therefore, if the hon. Gentleman will tell us whether the Clause as it stands is the Clause he wants, or whether it is the one which the Government are about to revise or amend in a substantial way.

Mr. Barber: There is no question, as a result of points raised in the debate, that the Clause will be revised in a substantial way. Two points raised in the debate seemed to be desirable to be looked into. One was on the Amendment in page 12, line 36, which seemed an extremely good point which we ought to try to meet, though my hon. Friend the Member for Nottingham, South (Mr. W. Clark) would be the first to agree, I am sure, that it is a comparatively minor point. We shall, however, try to deal with it.
Then there was the point raised concerning earned income relief. Our intention was that earned income relief in the circumstances mentioned should not be lost, and if an Amendment is necessary, which I very much doubt, the Bill will be amended. But I am surprised that the hon. Member for Gloucester (Mr. Diamond) should suggest that anything in the nature of a substantial amendment of the Clause is necessary. I hope that nothing that I said gave that impression. At the outset of discussions on this difficult technical matter, it seems to me that the Committee stage is the proper place for suggestions to be made for improving the Bill. I know that the Economic Secretary and the Solicitor-General and I will take very seriously


any points of this kind which are made. Indeed, we welcome them. Even when these Clauses have passed the Committee stage, if any hon. Member cares to write to me or my hon. Friends we should be delighted to receive advice on how the Bill might be improved. If any questions are asked of me and I can help the Committee by answering immediately, I will always do so, and if I cannot I shall say so quite frankly and do my best to provide the information later.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Orders of the Day — Schedule 4.—(CASE VIII OF SCHEDULE D: ALLOWABLE DEDUCTIONS.)

Mr. W. Clark: I beg to move, in page 72, line 20, leave out from "1952" to end of line 23 and insert:
together with actual expenditure on repairs. insurance and maintenance in the year of assessment".

The Deputy-Chairman (Sir Robert Grimston): It would be convenient also to take the Amendment in page 72, leave out lines 28 to 44.

Mr. Clark: It must be very obvious to the Committee that my drafting of Amendments is not very good, but I should like to explain to my hon. and learned Friend the Solicitor-General what I am endeavouring to secure here. Over the years property owners have built up a tax reserve under a maintenance claim and at any one time there is a five-year debenture on which the owner has had one-fifth, two-fifths or four-fifths of the actual expenditure. When we are dealing with Schedule A in its own context and bringing these rents under Case VIII this means that we shall cut immediately any maintenance claim built up over the period. This is an anomaly which I think the Government did not envisage. It is fair to say that many landlords are very good landlords. We always see publicity about bad landlords, but there are many good ones and, over the years; these have spent money on maintenance and improving their property and have thereby built up a maintenance claim.
The object of the Amendments is to allow a property owner, whether it be a company or a private individual, to take advantage over the succeeding five years

from 1963–64 up to 1967–68 of the decreasing part of the maintenance claim and so obtain it on an actual basis by adding the actual expenditure over the successive five years. I should like to give the Committee a simple example. Taking the period from 1958–59 to 1962–63, there is a maintenance claim of £100 a year, which gives a total of £500, and the normal one-fifth maintenance claim which, of course, is £100. Under this Bill, in 1963–64 the landlord will receive that £100 and in subsequent years he goes on to a basis of actual expenditure. There is an option to carry on the moving average, but this is merely putting off the evil day for the landlord.
Under my Amendment, taking the hypothesis of a £500 maintenance claim which has been built up over the period, in the first year 1963–64 the landlord would receive one-fifth, which is £100, plus his actual expenditure over the years 1963–64. Next year it will be only one-fifth of £400, making £80 past maintenance relief plus actual expenditure, but there is an increasing amount of carry-forward expenditure so that at the end of the period the landlord will have received the maintenance claim which he has built up.
Although I know that there has been a tremendous agitation in all parts of the country to get rid of Schedule A, it has been principally concerned with the position of owner-occupiers. A year or two ago some of my hon. Friends tabled an Amendment asking the Government to abolish Schedule A and to assess rents under Schedule D. I am sure that it was never thought by the business world that a property-owning company would have been a runner for the abolition of Schedule A, as it was thought that abolition was aimed at owner-occupiers. Consequently, there are landlords who have spent money on property thinking that they were building up a reserve of maintenance claim on future rents.
This provision therefore penalises the good landlord, because the landlord who has not in the past maintained his property and has not built up a maintenance claim to carry forward has enjoyed an additional profit because of the statutory allowance which he has received in respect of amounts which he has not spent on his property. This is


another reason why the Government should look sympathetically on the Amendment.
Although I hope that this is a brief explanation of what I am attempting to do, I should not like my hon. and learned Friend to think that it is any less important because of my brevity. I hope that he will consider whether something can be done to remedy this anomaly which penalises good landlords.

Mr. Graham Page: Under this part of the Schedule to which these Amendments apply tae taxpayer is given an opportunity to elect to continue on the five-year average basis for a certain number of years up to 1967–68. The only reason why the taxpayer should choose to do that and elect to carry on on a five-year basis would be that over the past two or three years he has had a large expenditure on maintenance and repairs and he hopes to get that back again by averaging over the next few years. He has what one might call an unexpended balance of maintenance claim. This sounds rather like the Town and Country Planning Acts. We used to talk of unexpended balances when we discussed them. In other words, the taxpayer has a reserve of maintenance claim.
Over the past few years the Government have exhorted landlords to spend money on maintaining their property. There has been considerable agitation for this in recent years. Thus, landlords who have complied with that aim will be penalised by the Clause, but, worse still, they will see that the only way in which to get back that unexpended balance of maintenance claim will be to do no repairs for the next two years; to elect to continue on a five-year average and spend nothing on repairs. Surely, that is not something that we want to encourage.
I believe that this election is the wrong way altogether. These Amendments would prevent that happening, and would encourage landlords to continue to spend money on repairs and maintenance because, over the next few years, they will be getting back their accumulated balance of maintenance claim as well as the actual expenditure. They deserve it. Otherwise, whether the five-year average ceases now or in 1967 and 1968, the landlord who has spent or, as

it were, overspent on repairs—that is to say, has spent more than he can get back—will lose, whatever be the year in which we stop the average applying, unless this provision is built into the Bill.
What is proposed is only fair, reasonable and just to the landlords who have complied with what the Government have wanted landlords to do, which is to maintain and repair their property. If this provision is not incorporated in the Bill, unscrupulous landlords who want to get back their maintenance reserve by not spending any money on repairs for the next two or three years will be encouraged.

7.0 p.m.

The Solicitor-General (Sir Peter Rawlinson): My hon. Friend the Member for Nottingham, South (Mr. W. Clark) is wholly mistaken if he believes that anyone thinks that brevity is in any way to be complained of, or that it concealed the vigour and point of what he said. My hon. Friend has not only launched me into the Finance Bill, which is something most people regret. but he has also launched the Committee into what the hon. and learned Member for Kettering (Mr. Mitchison) has already referred to as the very complex matter of Schedule 4.
It would not be in order for me at this stage to deal with the whole of the Schedule, but, in order to set the scene for the Amendment, perhaps I may remind the Committee that with the ending of Schedule A after 1963–64 there is to be substituted—or so it is proposed—the system of direct taxation of rents and other income arising from property, under Case VIII, and Schedule 4 sets out a system which will operate in 1964–65 in allowing expenses as a deduction in arriving at the amount of taxable profits. The old system, of which we have recently been talking, of assessment of the net annual value under Schedule A, and the provisions of Section 175, will disappear.
I note what my hon. Friend said about his drafting, and I quite appreciate what he has in mind, but his Amendment would allow landlords to deduct from rents during the period 1964–65 to 1967–68 both the expenditure on maintenance, repairs and other such matters according to the average over the pre-


ceding five years, which is the present basis, and also the actual expenditure on maintenance and repairs—but not on management—in the year concerned. Thus, the whole expenses of maintenance, etc. incurred in 1964–65 would be allowed relief against the rents of 1964–65, and the one-fifth to which my hon. Friend referred—the average of the past five years—could also be used as a relief against the rents of each of the years from 1965–66 to 1967–68. That is the effect of the Amendment, although, as my hon. Friend has pointed out, what he is concerned with is the expenditure over the five years which has not so far been written off. My hon. Friend the Member for Crosby (Mr. Graham Page) has pointed out the difficulties and the problems of the man whom he described as the good landlord.
Normally, before 1964–65, when Case VIII comes into effect, subject to the deductions in this Schedule, rents will have been taxed under the Schedule A system and the excess rent provisions. Under those provisions the amount on which tax is payable is arrived at by first computing the annual value by reducing the rent by the tenants' rates, etc., that are paid by the landlord and by increasing it by the value of the repair obligations assumed by the tenant, and, secondly, by allowing from this the statutory repairs deduction based upon the proportion that my hon. Friend mentioned. The statutory repairs deduction is at present given whether or not the repairs are done, but if the actual expenditure on maintenance on the five-year average basis was greater than the statutory repairs allowance, relief can be given for the excess by means of a maintenance claim.
Perhaps the Committee will allow me to use an example in what, I fear, is a very complex Schedule. If, under the present law a landlord acquired a property in 1955-56, rented it at £700 a year and remained responsible for all the repairs, the annual value would be £700 and the repair deduction would be £120; that is, £20 plus one-sixth of the annual value over £100, namely, £600.
If it is an old property the landlord will be able to make claims in the first five years in respect of the expenditure

of his predecessor in title, that is to say, if he were able to show that the five-year average in the period was in excess of £120. Alternatively, he would be able to make maintenance claims on the basis of his current expenditure for the first five years—1955–56 to 1960–61—and then use that expenditure over again in arriving at a five-year average for maintenance claims in subsequent years. If it is a new property, in five years the repairs deduction will have exceeded what has been spent on the property.
Thus, maintenance claims meet the case year by year where the average expenditure exceeds the statutory repairs deduction. The whole process is, and always has been, one of averaging, and I certainly accept that some items come into computation which would not on a current year basis, but that others are lost from it. What the claimant's predecessor spent may come into computation, or alternatively items may come in twice—under the new owner's concession, but, by and large, what has, in effect. been carried out is that the landlord each year has been given the equivalent of one year's expenditure against one year's income. That has been the approximate position under the existing law but, when Case VIII gets into its stride, the principle will be that the deduction is given against rents for the expenses of the current year, with a set-off of deficiencies, sideways if a pool property, or otherwise carried forwards. But it could be hard on landlords—and this is what the Government have accepted and as my hon. Friends have pointed out—who have incurred heavy expenditure in 1962–63 and who, under the maintenance claim, will obtain relief on only one-fifth in 1963–64.
With regard to properties in those circumstances, properties which are owned in 1962–63, provision is made that the landlord can remain on the five-year average basis up to 1967–68, or, of course, any earlier year. If they wish to change from that basis earlier than 1967–68 they can do so if they think that that is more favourable. In other words, they are given a choice. The choice is either to stay on the five-year average as it was under Schedule A or to go over to the current basis. I see the force in what my hon. Friends foreshadowed


about the time limit for election because of what has happened in the past and the position of what has been properly described as the good landlord and those people who have built up a balance.
While I cannot recommend the Committee to accept the principle as set out in the Amendment, I think that my hon. Friend the Member for Nottingham, South, has made out a case for considering whether the time limit for election should be made more generous. If that happened, I can see the effect that it would have. I suggest to my hon. Friend that what I have said may meet the point he has in mind.

Mr. W. Clark: If we extend the time limit, we are merely putting off the evil day. Between now and 1967–68, landlords, if they know that they will lose the maintenance claim in 1967–68, will go on to actual because there is no further election. This will mean that rented property throughout the country will, as a matter of policy, not be maintained. Therefore, landlords will lose the minimum on a built up maintenance claim. I do not think that the point is the timing of the election. If we are going to pay up to 1967–68, we have the five year moving average and we shall be faced with the problem in 1968 instead of in 1963.

The Solicitor-General: Obviously, under the Bill, the current year basis is the basis on which the person has to go eventually. But it is appreciated that it could be hard for those who have built up a store or reserve who at some time have to transfer to the current basis. I do not think that landlords will adopt the attitude which my hon. Friend foreshadows once the transition has taken place, but I can see that if we make it too swift and too short there may be the hardship about which my hon. Friend spoke.

Mr. Mitchison: I have certain practical experience, as I am sure many hon. Members have, of this type of claim. I am a little disturbed by what seems to me to be the underlying purpose of the Amendment.
Take the position of the landlord who, without doing anything imprudent or improper, but in the ordinary course of events, incurred very considerable expenditure, say, a year ago. There may have

been all sorts of reasons for it. If he is in the part of Scotland where I live, he may have had a singularly bad attack of dry rot, but there are other reasons. He therefore has to spend a great deal more than usual.
7.15 p.m.
Under the present law, these "bumps up" and "bumps down", as it were, work themselves out in the ordinary course of events, and the five-year average has the advantage of corresponding with the way in which things happen. The limit has always been the statutory amount of deduction. One is concerned only with the excess over that. That is worked out in relation to the periodicity, as it were, of the expenditure. That will be abolished in favour of the current year's expenditure.
I see the difficulty, perhaps the impossibility, of doing the ironing out which hitherto has been done by the moving average, but it has some extremely difficult consequences. Assume that the landlord—and let us not impute motives to him one way or the other—is doubtful about whether he should incur certain expenditure during the current year, and elects to continue the moving average. This surely will swing him on the side of not doing repairs, which is the opposite of what we want to do,
I should have thought that, in dealing with this type of case, where there was a choice between two pieces of machinery, one should always favour the machinery which, on the one hand, corresponds with the facts and, on the other, presents an inducement to the landlord to do the repairs, or, to put it the other way round, does not present any inducement to the landlord not to do the repairs. I do not want to express myself strongly about this. I can see the very considerable practical difficulties involved. Indeed, they may be insuperable. There may be something inherent in a change which, on broad grounds, we would all welcome.
I hope that when the matter is considered regard will be had to these two factors. One is that in the nature of the case, with some properties at any rate, there are ups and downs in necessary expenditure, even if we regard the standard of necessity as the same all the time. The accidents of nature. whatever their form, are bound to have that effect.


Therefore, one must, if one can, find some means of dealing with that. Secondly, one must be careful of putting the fiscal machinery in the position of becoming an inducement to the landlord —not necessarily a conclusive one but still an inducement—to refrain from doing repairs which he should do.

Sir E. Errington: I think that it was hardly fair of my hon. and learned Friend the Solicitor-General to take new property as a test for dealing with this sort of matter. New property is very rarely the subject of a maintenance claim of any considerable amount. I therefore think that to look at the matter from the point of view of new property begs the important question which arises on the older type of property.
I do not consider that there is any merit at all in the election and to extend the time for election in which to decide whether to go on to the actual amount spent does not solve the problem.
I was further disturbed by the sort of suggestion that was made that on this arrangement those who own property would be getting two kinds of relief, namely, the actual and the relief of the balance of the maintenance claim, what is called the revolving claim. The actual amount spent is referenced to the particular year in which the amount is spent. The balance of the maintenance claim is in respect of other years prior to 1964–65.
I am not sure that the amount is considerable, but what is clear is that the amount has been spent by those people who own the property. Whether it is done in the way suggested in the Amendment by making a decision definitely to go over to the actual in 1964–65 or whether it is done by giving something in the nature of a tax reserve certificate relative to each year for the unexpended balance of the maintenance claim, does not seem to me to matter.
What is clearly beyond doubt is that the suggestions in the Amendment do not involve any question of benefit being given twice over. It is clear, I hope, to everybody that the reference to the maintenance claim is prior to the question of the actual amount. In those circumstances, it seems only fair that the balance of the maintenance claim should be given

even if the payment in regard thereto is made during a year when an actual claim has been made.

Mr. Graham Page: I apologise for speaking again on the Amendment, but I do not feel that my hon. and learned Friend the Solicitor-General sees the point as we see it from these benches. I am sure that by his noises and shaking of the head, the hon. Member for Gloucester (Mr. Diamond) is not with us. I believe that I can bring him and my hon. and learned Friend with us by giving a simple if exaggerated example.
The whole point of the five-year average is, surely, that one does not spend the same amount on repairs and maintenance of a house every year. The repairs are phased. A very large amount might be spent on repairs in any one year, and it is averaged out over the five years and recovered on this average basis.
Thinking of the phasing and taking the exaggerated example, let us suppose that in the middle year of the last five years, a man spends £500, and nothing in the other years. Because the net annual value is £80, the amount which he can recover over the whole five years is £400. There remains £100 which he has not been able to claim. If the Bill takes effect as drafted, he would never be able to claim that £100 or to recover relief upon it. Whatever he may spend in future, whether it be Id., £100 or £500 in a year, he will get back his actual expenditure but he will never get back the relief on the outstanding £100.
Whether the formula suggested by my hon. Friend the Member for Nottingham, South (Mr. W. Clark) is correct is a matter for argument. I think that it would work out in fairness to the landlord. There should, however, be a formula which would allow the landlord to spread the missing £100 over the next years and so recover it as well as his actual expenditure for the next few years.

The Solicitor-General: I appreciate very much what my hon. Friend the Member for Crosby (Mr. Graham Page) has said. Nevertheless, the drafting of the Amendment would allow the landlord to deduct both the expenditure on maintenance and repairs according to the preceding averaged five years and the actual expenditure on maintenance in the year concerned.

Mr. Graham Page: Why not?

The Solicitor-General: The whole of the expenses of maintenance incurred in 1964–65 would be allowed for relief against rents of that year and one-fifth of that expenditure could also be allowed in each of the next three years. That is what the Amendment would permit, although I understood my hon. Friend the Member for Nottingham, South (Mr. W. Clark) to be concerned over the expenditure during the five-year period before 1964–65. If there is, as the Bill provides there should be, transference from the five-year average period to the current actual period, there has to be a period of transition, and there will be a period in which in certain circumstances a landlord is in a position when he needs, and should get, more relief in the sense that he has paid out a great deal more than somebody else on a property. It was for that reason that I suggested to my hon. Friend that if this transference to the actual basis is made, the case which he had in mind might be met by extending the time during which the landlord could make the election.
I can only repeat, as my hon. Friends the Economic Secretary and the Financial. Secretary have said, that the points which have been made in this debate, particularly by my hon. Friend the Member for Aldershot (Sir E. Errington), as well as by my hon. Friends the Members for Crosby and for Nottingham, South, certainly will be studied and considered with the greatest care and attention. The matter is so extremely complex and the ramifications of each part of it are such that it needs, and everyone wants to have, the advice and comment of everybody in the Committee.
I have listened with great care to what has been said, but it would be wrong for me to say more than that consideration certainly will be given. I have indicated that the period of transference should be examined to see whether it should be extended. It will be examined with care in the fight of all the comments which have been made. In these circumstances, I hope that my hon. Friend will withdraw his Amendment.

Mr. W. Clark: I am grateful to my hon. and learned Friend the Solicitor-General for what he has said and I take particular notice of his word

"generous". The point has been made that some landlords will be penalised because they have built up this reserve of maintenance. If the Government are to be generous in allowing landlords to recoup this built-up maintenance claim over a longer period. I am delighted and I shall look forward with great interest to see what comes out of this debate.
In view of what my hon. and learned Friend has said, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn

7.30 p.m.

Mr. Stanley R. McMaster: I beg to move, in page 73, line 13, at the end to insert:
Provided that nothing in this paragraph shall affect the operation of Section 16 of the Finance Act 1954 (by which investment allowances are made in respect of capital expenditure on new assets).
Like the one before, this is a technical Amendment, This subject has attracted the attention of professional people who have studied the Bill and whose duty it will be to apply its provisions. It is provided in Clause 22—Treatment of premiums, etc. as rent—that the tenant who is obliged by the terms of the lease to carry out work on the premises is deemed to have paid a premium of an amount equal to the increased value of the premises resulting from that expenditure. This deemed premium is then deductible to the extent which is chargeable on the landlord under sub-paragraph (a) of Schedule 4.
It is provided by Section 330 of the Income Tax Act, 1952, that, for investment allowance purposes, capital expenditure is excluded expenditure allowed as a deduction in calculating profits. The result of this would appear to be that investment allowances may be precluded to the extent to which expenditure is deemed to be a premium and is deductible in calculating profits.
This effect is surely not intended, and the purpose of the Amendment is to make it clear that investment allowances will continue to be granted where they would normally be due. In addition to that, if this Amendment is not accepted, the effect will be that a lessor will be required to pay tax on a percentage of the value of the building and plant, although no receipts would have arisen in respect of


the deemed premium. That is inequitable. It would also be inequitable to impose a tax on the cost of the work undertaken without making provision for possible reductions in value at the conclusion of the lease.
These are difficult points which I should like the Government to consider. Perhaps the drafting of the Amendment leaves something to be desired, but these points have been put by professional bodies, including the tax panels of the Federation of British Industries and the Association of British Chambers of Commerce, and the Association of Certified and Corporate Accountants also considers this to be a defect in the Bill.

The Solicitor-General: I hope that I can reassure my hon. Friend the Member for Belfast, East (Mr. McMaster). Some of his fears are groundless and there is no intention that there should be the effects he mentioned. The effect of his Amendment would be to ensure that any capital expenditure incurred by a tenant of premises which are subsequently sublet, under an obligation in the lease—which sometimes arises—to execute works, particularly industrial undertakings, would not be prevented from qualifying for investment allowances under Section 16 of the Finance Act, 1954, because the obligation would have to be taken into account in arriving at a charge on the landlord under Clause 22(2) of this Bill.
The fears that traders' investment allowances may be cut by reference to Section 330 of the Income Tax Act, 1952, which defines capital expenditure, are groundless. The capital expenditure of the tenant is not itself allowed to be deducted in computing his profits—and we are foreshadowing Clause 22 in this matter—although his deduction is related to a notional premium, which is, in turn, related to the work to be done and thus eventually reflects the expenditure.
However, I must advise the Committee that this connection is too remote to prevent the grant to the tenant either of the investment allowances or of the initial and annual allowances. So, to that extent, the Amendment is unnecessary. But I am glad to have had this opportunity of reassuring my hon. Friend. ft points to the fact that certain examinations may still have to be made of this part of the

Schedule to ensure that the tenant does not get a double allowance for expenditure and also by reference to the taxable element in a notional premium. I only say that by the way, however. This is an important subject and it was useful to have this Amendment moved but I hope that, on reflection, my hon. Friend will realise that his fears are not as wide as he thought.

Mr. Diamond: Why does the hon. and learned Gentleman think it right that we should be compelled to consider this Schedule, which relates to Clause 22—indeed, without understanding Clause 22 one cannot understand the Schedule—in between Clauses 15 and 16?

The Deputy-Chairman: Order. We cannot go into that now.

Mr. McMaster: In view of what my hon. and learned Friend has said, particularly the last point concerning the possibility of the tenant being doubly relieved—which I had not noticed—I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Mr. W. Clark: I beg to move, in page 74, line 19, to leave out sub-paragraph (c).

The Deputy-Chairman: Perhaps it would be possible to discuss at the same time the other proposed Amendment to the Schedule in the name of the hon. Member—in page 76, line 17, at end to insert:
14. Where the deductions allowable for the purposes of Case VIII exceed the income for any year of assessment. such excess shall be available for relief under Section 341 of the Act of 1952, and in so far as relief cannot be given under that Section it shall be available for relief against any assessment under Cases VI or VIII for subsequent years provided that relief shall be given only once for such excess.

Mr. Clark: They are related, Sir Robert.
This again is rather a technical matter. It is a question of Case VIII losses. I am sure that the drafting of the Amendment is again a little inefficient, but the spirit of the thing is that in Case VIII it should be perfectly clear that losses should be allowed to be carried forward even if they cannot be set off against other income, but that in any case any loss on one property should be able to be set off


against profit on another property in the same year. Even then, of course, the thing remains a loss and I ask that it should be carried on as in any other case under our tax system.

The Solicitor-General: The effect of the Amendment would be to deprive some taxpayers of some relief. Paragraph 11(2) of the Schedule lists the expenses allowable against Case VIII receipts other than rents, etc. First of all, it provides for relief for appropriate expenses of maintenance of premises, and, secondly, for reliefs for rents paid and then for these other payments which the Amendment would omit.
The kind of expenses envisaged, which wore foreshadowed by the hon. Member for Dunbartonshire, East (Mr. Bence) would be expenses incurred, for instance, by somebody in having persons shown round a stately home, which would not, however, be sufficient to amount to a trade assessable under Case I of Schedule D. At present. the receipts would be assessable under Case VI, but under the Bill they fall within Clause 15(1). These expenses would not be covered by paragraphs (a) or (b). If paragraph (c) were removed, as has been suggested, that would have the effect of depriving some taxpayers of relief, and I do not think that this is what my hon. Friend has in mind.
I turn to the other Amendment, which is an important matter. Although my hon. Friend was commendably brief, I find it more difficult to be brief in reply to him. The scheme of Schedule 4—I fear that I have to go back to this again t indeed, this is one of the difficulties which we all experience—is to allow, first, expenditure attributable to properties let under lessors' repairing leases at full rents against the income arising from the same property and other properties in the pool; secondly, expenses attributable in respect of other properties let at full rents but not on lessors' repairing leases in so far as they exceed income may be carried forward against rents from the subsequent letting of the same property; thirdly, deductions for expenditure attributable to properties which are not let at full rents would be allowable only against rents arising out of the current lease.
Those are the three different kinds of property which have to be provided for

in Schedule 4 and tae object of the change is the replacement of the conventional reliefs, reliefs which there have always been before and which hon. Members say are time-honoured practice, by the deductions for expenditure actually incurred. That does not mean that the excesses of expenditure over income arising from property would qualify for relief in the same way as trading losses. That has been considered, as some hon. and learned Members will recollect, in the House of Lords in various cases. It was pointed out by the Royal Commission that losses in respect of buildings or land were not comparable with losses in business. It is apparent that the receipts and rents chargeable under Case VIII are investment income and not trading income and I think that it is universally accepted that they should not qualify for earned income relief. The ordinary rule with investment income is that no allowance is made for expenses.
Therefore, the principle followed in Schedule 4—and this is why, I fear, it has taken me some time to reply to this Amendment—is that the landlord is not allowed relief for an excess of expenditure over income where the rent is not a full rent, in other words, where he is not expected to cover all his own obligations.under the lease and the expenses of upkeep. If there were such a letting, it would not be a business transaction and there would be no reason for the landlord to get relief against other income which arose from leases. The excess of expenditure over income arising from the lessors' repairing leases could be set against income arising under leases of the same kind, but not against income from ground rents, which are in the nature of pure profit income. Thirdly, where tenants' repairing leases give rise to a deficiency, that could be carried forward against future incomes for the same premises or set of premises, but not for another set of premises in the group or pool.
7.45 p.m.
I must therefore reject any suggestion which is inherent in the Amendment that excesses of expenditure over income arising from property should be assimilated to trading losses and set against property generally. But the other points which arise are such as to merit consideration and, though I fear that I have


said it before and I continue to say it each time, we will certainly give further consideration to the points raised by my hon. Friend even—

Mr. W. R. Rees-Davies: Before my hon. and learned Friend concludes; I am trying to follow and understand, but I cannot claim that I am satisfied, although I have no knowledge of this subject. Many constituents have been plaguing me with this question. Let us suppose that an owner has one property—this is typical of Margate and such places—and he lets off rooms or flats in it and, because of the outgoings and expenditure in one year, he has a bad year and suffers a loss. Could he catch up the following year in respect of that property, saying, "I was sustaining a loss last year and I want to carry that loss forward to next year"?
I have appreciated that that cannot be done for a pool of properties—one property could not be set off against the other—and I can see the strong case for saying that, because that is not like a business and one could simply plough a lot of money into the losing property and set off one against the other.
I have two questions. First, is there to be anything simple for the public so that the ordinary boarding house keeper, hotelier or other individual will be able to understand this provision? I will be quite blunt about it. I have not a clue about this and I am doing my best but still not getting very far and I am sure that the public will not. Secondly, if an owner suffers a loss on an individual property—and most of the people I have in mind own only one property—can he carry the loss forward into the following year? I am sorry to be dumb about this, but there it is.

Mr. Bence: It was a breath of fresh air.

The Solicitor-General: The icy blast which has blown from my right should have been in another direction. Because of our procedure, we have to deal with Amendments before we are able to explain the Schedule itself. My difficulty is that here we have one of the most complicated Schedules with which the Committee has ever been presented, certainly for a long time, containing a major change in our Income Tax law. The difficulty is that we have to take bits

and pieces out of it when replying to various Amendments. I am sorry that it is so complex and I am probably making it much more complicated, but it is very difficult.
The answer to my hon. Friend the Member for Isle of Thanet (Mr. Rees-Davies) is that the loss on that one property would be carried forward. He has under-estimated his powers of understanding or ability to grope through the murk of Schedule 4. He was quite right in his suspicions that the pool of property where there is a full rent and the repairing obligation is imposed fully on the landlord cannot be extended to cover the third class where there is not a full rent. What he believed to be right was right. The answer to his second question is that it can be done. In reply to his general comments and strictures, I hope that he will join in the discussion of Schedule 4 itself.

Mr. Graham Page: The point with which we are dealing is a fundamental one, whether a person can carry forward losses on rents and repairs to property in the same way as he can carry forward trade losses. I understand from what the Solicitor-General said that somewhere in Schedule 4, or somewhere else in the Bill, it is provided that a person can carry forward losses on property if it is let at a full rent. I have not spotted the Clause or line which contains that provision, but I accept what my hon. and learned Friend says.
The whole business of the management of property to let is surely the phasing of repairs and maintenance, and perhaps the repairing of one property when it becomes void. If a landlord is managing properties to let—and after all the Government are trying to encourage owners to build properties to let, and to keep those properties to let—in taxing him it would only be fair, when a loss is incurred in one year, to allow him to carry it forward to the next year in the same way as any other trading loss.
Why should there be a distinction between the man who owns one house and lets it and is able in one year to spend a lot of money on that house and make a loss which he can carry forward to the next year. and the man who owns five houses, or ten houses, or a hundred houses? Why should he be told that he


can only carry forward the losses on one house at one time. If he is managing a whole estate, it might in any one year pay him to keep some houses void for a period and carry out thorough repairs to them. This might be an economic way of doing the job, and in that year he might make a heavy loss. Why should he not be able to carry that loss forward in the same way as a trading man would be allowed to do?
I think that we are tackling a fundamental point. if we are doing away with Schedule A, let us put this on a proper trading basis, and a basis which will encourage people to go into the business of letting houses, because the Government want to encourage people to go into that business.

Mr. Bellenger: If there were 20, 30, 40, or 100 houses involved, would not it be possible for the owner of those properties to convert his holding into a limited property company, when the trading would be under a different Case from this one—probably Case I—in which event all legitimate expenses could be put against the income and losses carried forward?

Mr. Graham Page: I am not sure that that would be Case I, but if it were it would prove my argument. Why should there be this distinction between the limited company and the individual who is trying to run a decent business?

Mr. W. Clark: My hon. and learned Friend said that he would look at this again. Will he allow the carrying forward of losses because, as my hon. Friend the Member for Crosby (Mr. Graham Page) said, if there is a property company it will be assessed in any case under Case VIII and not under Case I. If it is assessed under Case VIII, whether it owns 10, or 100, or 1,000 houses, are we going to say to that company that it can carry forward the loss on the block of flats A to the future profits on block of flats A, but it cannot carry forward the losses in respect of block of flats B? This will make nonsense of any attempt to simplify the accounting and taxation of property companies. Should that happen, property companies and people interested in property will look back with nostalgia to the days when they were assessed under Schedule A.
When I speak about property companies, I accept the point about ground rents. If there is an ordinary property company which has houses or fiats to let, it is impracticable to say that losses can be carried forward only through the channel of identifiable property. If my hon. and learned Friend is saying that in this mass of property which the company owns, losses, excluding ground rents, can he brought forward against successive profits, that is all right, but does my hon. and learned Friend mean separate properties being kept separate in accounts and being brought forward to offset losses against profits?

Mr. Bence: I was confused at the beginning, and I am more confused now. I apologise for entering into the discussion on this technical matter, but it seems that if an owner of, say, 100 houses, pays out £300 on the repairs to one house in one year, he can only set that against the rent of that house, but if he forms himself into a limited company, he can write off his losses against his 100 houses.

The Solicitor-General: I hope that I shall not make confusion more confounded. If my hon. Friend the Member for Nottingham, South (Mr. W. Clark) looks at the beginning of Schedule 4, to which we shall come after we have dealt with this, he will see that the scheme is to allow three different kinds of procedures, and I think he will agree that they are reasonable and comprehensive.
The first is that expenses can be attributable to properties let under a lessor's repairing lease at a full rent against income arising from the same and other properties in the pool based on the same kind of lease. In other words, if there is a full repairing lease and properties are let at a full rent, the expenses can be, as it were, attributable over the whole of that pool. But there are other kinds of rents where the responsibility upon the landlord is not that where there is a full repairing lease and what is known as a full rent. The answer to my hon. Friend's first point therefore is that where there is a pool one can do what he thinks one should be able to do.

Mr. Diamond: That is the normality of cases. If we can get that into everybody's head, and then make everyone understand that the hon. and learned


Gentleman is going to deal with the less normal case, I think that everybody will relax a good deal more.

The Solicitor-General: Though I should like to see everybody relax, I am afraid that dealing with Schedule 4 is not a relaxing occupation. It needs a great deal of concentration rather than relaxation.
The class of case to which I have referred is the first which the scheme under Schedule 4 is designed to allow. but then there are other cases of properties which are let at full rents, but not on a lessor's repairing lease. In other words, there are not all the full obligations on the landlord and their expenses can be carried forward against subsequent income for the same property.
There is the third case which I mentioned, that of expenses which are attributable to properties which are not let at full rents. This means not let at rents which would normally cover what the landlord pays out, and sometimes one has to provide for that. Those expenses are allowable only against loss arising under the current lease. That is because, for obvious reasons, if a person enters into such an agreement he cannot expect to have the advantages he would have if he were letting at the full rent.
I realise that this is an important matter. As I have said, the comments made by hon. Members on both sides of the Committee will be studied before the next stage of the Bill.

Mr. W. Clark: In view of what my hon. and learned Friend has said, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

8.0 p.m.

Mr. R. J. Maxwell-Hyslop: I beg to move, in page 75, line 12, to leave out "tidal".
The Amendment is a simple piece of surgery, involving the amputation of the one word "tidal." This matter has a somewhat lengthy history. Practically the whole phraseology of paragraph 13(1) of the Schedule is taken from the Finance Act of 1853—a century and a decade ago. Since then the provision has undergone no modification worth speaking of

—nor, incidentally, has the meaning of the phrase "tidal river" ever been tested in the courts, to the best of my knowledge. Last night I was conducted through the mysteries of Halsbury by a learned friend, and the only thing I found that could be regarded as connected with it was the case of Hesketh and Bray, in the Court of Appeal, in 1888. That case decided another point, but not the question of what constitutes a tidal river.
On the probably unreasonable assumption that words mean what they say, I take it that any river is a tidal river which does not flow into an inland lake or river. The provision does not refer to the tidal portion of a river. Had that been desired, the provision could have been so worded. So perhaps a tidal river is not the main tidal river but the tidal portion of the river. If it means the tidal portion of the river, which is certainly not what it says, that is also unacceptable, on two grounds.
It is no less necessary for somebody to protect his property against the overflowing of the non-tidal portion of a river than it is to protect his property against the overflowing of the tidal portion. But if this means a tidal river it restricts the benefit of the allowance of one twenty first part of the capital cost of erecting a flood wall or embankment over a 21-year period to those whose property adjoins the tidal portion of the river or the sea. Even this is more unreasonable than it seems, because in the case of Hesketh and Bray the court established that it was not an encroachment or overflowing of the sea if the sea only moved between its normal high and low water marks. Nor is it an encroachment or overflowing if it merely spreads itself up to its high water mark over the land which it inundates whenever it wants to do so within the existing high water mark. The time when flooding from sea water or tidal portions of rivers is particularly offensive and destructive is when there is a high tide in conjunction with an on-shore gale. The sea then refuses to recognise the high water mark.
It is quite unreasonable about this, and I apologise to my hon. and learned Friend that it should be unreasonable about it. It is unreasonable then, and it goes right up the estuary, far beyond


any high-water mark which the Minister of Housing and Local Government would ever recognise. Then it does not have the decency to confine itself to the natural water course of the river, but overflows on to property belonging to people who may not wish to have its visitation.
It is for the preservation or protection of such property—which was then called land but is now called premises—that our worthy forebears, in 1853, deemed it expedient to insert this provision, which is Section 37 of the Finance Act of that year, and which the Treasury draftsmen, in their economy, have embodied in every Finance Act since, to the best of my knowledge.
Since I understand that the matter has never been tested in the courts it is presumably a point which does not often arise. It is not, therefore, likely to be a point which would involve the Treasury in any great loss of treasure. I am informed by the Financial Secretary to the Treasury that this provision does not apply to factories or to agricultural land, because they have much larger allowances under other provisions. This applies only to property which is not factory property or agricultural property.
I hope that my hon. and learned Friend will treat the Chamber to his learned advice on the meaning of the phrase "tidal river", even though it will not he an opinion that is based on any decision of the courts that I have been able to discover.

The Solicitor-General: My hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) has introduced a refreshing breeze into the arid debate on Schedule 4. The only thing that has concerned me a little is the question of whose advice he took late last night, and where he conducted his researches. He is quite wrong in telling the Committee that these words have not been the subject of litigation or pronouncement by the courts. Indeed, it started as long ago as the seventeenth century—and that is a long time even by the standards of the law.
Even in those days Lord Hale said that a river that is called an arm of the sea where the sea flows and re-flows and so far only as the sea flows and re-flows is a tidal reach. Again—and my hon. Friend asked for quotations—I should tell the Committee that Mr. Justice Grove,

in the case of Reece v. Miller, dealt with the question of what constitutes a tidal navigable river. He said that that had been discussed in various cases, which he referred to. I appreciate the concern that has driven my hon. Friend to set down the Amendment, but he has had the misfortune of not having had very good advice on the interpretation of the words "tidal river".

Mr. Maxwell-Hyslop: But the first case which my hon. and learned Friend quoted did not concern a tidal river, but a tidal reach of river. Will he quote specifically the extract which he recommends to us from the case of Reece and Miller?

The Solicitor-General: My hon. Friend must have misunderstood me. According to Mr. Justice Grove the definition of a tidal river was that it went to the tidal reaches. Mr. Justice Grove said that the question of what constitutes a tidal navigable river had been discussed in various cases. The judgment, which also cites Lord Hale, goes on for a considerable time, and I would not be justified in presenting it to the Committee. These words do not have the difficulty of interpretation which my hon. Friend fears.
He is right in saying that the landlords of factories and manufacturers receive relief for work done to prevent flooding from anything, he it the wicked sea or the wind and the rain. They get them by capital allowances on industrial buildings and structures.
Secondly, agricultural landlords and farmers get relief for work done in this respect under Section 314 of the Income Tax Act, 1952. They get a ten-year period of writing off. So we are left with other landlords, commercial landlords and residential landlords. They are given relief by the provisions in paragraph 13 of this 4th Schedule which repeats broadly what has been the law and what is at present the law. My hon. Friend says that it is wrong in that it provides relief only from the sea or tidal river flooding. I can only say to him that it has not been the practice or the law to give relief for protection against other kinds of flooding.

Mr. Maxwell-Hyslop: Why not?

The Solicitor-General: It has been, as it were, the relief or protection which has


always been considered to be a Crown duty—this is really going back into history—in respect of the sea rather than the river. Therefore, the river is a tidal river in such parts only as are within the regular ebb and flow of the highest tide, and relief is given. That is why relief under paragraph 13 is only and has only been given in respect of such tidal invasion, which is invasion as it were from the sea. It has never been given for any other kind of flooding. For tat reason I cannot advise the Committee to accept the Amendment.

Mr. Maxwell-Hyslop: Does my hon. and learned Friend accept that the sea can and does flood above the high water mark to which he has referred the Committee, and therefore it might be prudent and necessary for a landlord to erect an embankment or sea wall at a point above the high water mark on the tidal reach, as my hon. and learned Friend defined it, in order to protect his property against encroachment not of a river but of the tidal part of a river?

The Solicitor-General: If it were the sea which came into the river and reached this particular height and caused particular flooding, it would be within the tidal reaches at a particular time. But I cannot say whether a man would be wise or not to engage in such a building or claim such relief. All I can say is that it would be a matter of interpretation of what caused a particular flood, which would probably give joy to a number of lawyers.

Mr. J. Grimood: As an amateur, I am interested in this difficult point of definition, upon which I do not pretend to speak with authority. I am sure that the Solicitor-General has convinced the hon. Member for Tiverton (Mr. Maxwell-Hyslop) that the Government know what is a tidal river. But I did not find the Solicitor-General altogether convincing in answering the second question from the hon. Gentleman. He seemed to say that this provision is in the Bill simply because it is repeating what has always been the law, and he implied that it had a long historical justification, and that that is the reason why it is confined to a tidal river.
The hon. and learned Gentleman failed to advance any reason why it should

continue to be confined to tidal rivers, I should have thought he might have said that he would look at this matter again. Apart from the historical reasons, are there any reasons why a landlord who protects his property, and who is not an agricultural landlord but a private landlord protecting his property, should continue to be excluded? Would he benefit under some other legislation, and if not, is there any reason why the differentiation should continue, and will the Government look at this matter again?

The Solicitor-General: Schedule 4, dealing with Case VIII, when it comes into effect will relate to deductions allowable in certain circumstances against income. That is why paragraph 13 is brought into this part of the Schedule, to provide in this respect.

Mr. Bence: I am not satisfied with the answer given by the Solicitor-General regarding the definition of a tidal river and of flooding. In the part of Glasgow where I live, which is not far from the Clyde, there is a brook or a burn as it is called, which runs into the Clyde. This brook floods not because of sea water but because the high tide in the Clyde prevents the fresh water in the brook from getting away, and so property is flooded and we have to take precautions against flooding. Am I being flooded by a fresh water burn or by the high tide in the Clyde. I admit that it is fresh water, but was it caused by the tidal reach in the river? Am I being flooded by a tidal river or not? If I take precautions to protect my house from the effects of a high flood tide on the Clyde, am I entitled to set that off as a claim? I am not satisfied with this definition of a tidal river extending to the tidal reach.
There is a lot of flooding by the river Wye at Monmouth and in Gloucestershire, where the river rises as much as 30 ft. at high tide. There is no flooding in the estuary where the land is high. But at Monmouth, far beyond the tidal reach, where the land is lower, there is flooding. This definition of a tidal river has been taken from the seventeenth century when people did not have the understanding given to Lord's Advocate and Solicitor's-General in these days. At that time Parliament was not so erudite


nor had its Members so many resources for research and they were not so qualified in the use or appreciation of language. It is about time that this definition was changed. I do not suggest that I am competent to do it, but I think it should be changed. I hope that the definition will be looked at again and the word "tidal" removed. so that we may obtain protection from flooding whether tidal or otherwise.

8.15 p.m.

Mr. McMaster: I am also confused I think I was able to follow what my hon. and learned Friend the Solicitor-General said in distinguishing between a tidal river and non-tidal river. In my constituency there is the River Lagan, which flows into the sea through Lisburn. Is the river a tidal river at Lisburn because it flows into the sea? I should have thought that it was. If it floods at Lisburn, is the flooding there caused by a tidal river, taking the words here.
… against the encroachment or overflowing of the sea or any tidal river …"?
Suppose that it is not the sea? There is here the word "or" in the paragraph and I should have thought that above the reach of the tide would come under the ordinary meaning of these words. In the same paragraph there is reference to the
… making of any sea wall or other embankment…
If that is meant to be limited to a sea wall or other embankment, I should have thought that the drafting of this paragraph means it is to apply not only to the sea portion but to the rest of the river.

Mr. Houghton: I think now that the debate has got going we had better all mention our rivers. I have the River Calder. It is a long way from the sea, but storms take place on the Yorkshire Moors and torrents of rain come down into the lower parts of my constituency and flood them doing serious damage to property. One sees river walls holding up gardens and houses where otherwise serious damage would occur.
I am getting more and more interested in this question of tidal rivers. If the hon. Member for Tiverton (Mr. Maxwell-Hyslop) presses the Amendment to a Division, I shall certainly support him. When the Solicitor-General replies, as he has been studying this matter very closely, will he give information about the tide

which is running so strongly against the Government at present?

Mr. Denys Bullard: I added my name to this Amendment because I was interested in the definition of a tidal river. As the matter has now worked out I am not yet fully aware of the reason why a person who happens to he above the extent of the tidal reaches of the river should not have this benefit as well as the person who is below that part of the river.
I heard the Solicitor-General answer the right hon. Member for Orkney and Shetland (Mr. Grimond) about the idea of the Schedule, but I do not think he pave any reason why a person further up the river should not have the same benefit. Although I hope that my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) will not press the Amendment to a Division, I should like to be satisfied on this point before we leave the matter.

The Solicitor-General: In answer to the hon. Member for Sowerby (Mr. Houghton), tides do ebb and they do flow, as we have shown very considerably in the course of this debate.
Perhaps one may build up very substantial walls against tides and sometimes see those tides withdraw completely so that one lives very much more happily seeing the tide in the distance than if it is beating against the wall. This provision involves the tidal reaches, and that is a question of fact. It will be a question of fact in each case as to what has caused the particular flooding. Paragraph 13 is to maintain what has always been the position. It is to accept responsibility by giving a relief where flooding is caused by the encroachment or overflowing of the sea. Then it involves the question of a tidal river.
My hon. Friend the Member for Tiverton and my hon. Friend the Member for King's Lynn (Mr. Bullard) have asked, if this relief is given for those concerned with the tidal part of the river, why should it not be given in respect of other types of river? My hon. Friend the Member for Tiverton illustrated how this happens in his part of the world and other hon. Members have said that it happens in their parts, not apparently by the encroachment of the sea, but above the tidal reaches and having nothing to do with the sea.
I understand the point made that the word "tidal" should be removed, but I can only say to my hon. Friend that we deal with a river in that sense because never before has this relief been given. Are we in the middle of this Bill, at this time, on paragraph 13 of the Fourth Schedule, to change what has always been the position? [HON. MEMBERS: "Yes."] A case has been made that if the relief is given for this Act of God, or act of the sea, why should it not be given for other matters and other considerations? Then we should have to consider the implications. In paragraph 13 a capital expense is allowed against income. That is very unusual. The same provision—this is not always a good reason, but it sometimes appeals to lawyers—has been applied since 1853 and we thought there was not sufficient reason for the change suggested by my hon. Friends at this time. For that reason the provision has been drafted in this way to include a tidal river because it is the responsibility—I use the term in the broadest sense—an historical responsibility of the Crown. It involves a capital allowance and it seems right to restrict it to tidal rivers.

Mr. Maxwell-Hyslop: I gave notice of this matter on 2nd May in a letter to the Chancellor of the Exchequer. I cannot see that any very good reason has been put forward against what seemed quite sensible questions. On the first, the question about definition, I understand that if one is up the river one is "up the creek". This is not only a question of being flooded by river water above high tide mark, but also that under certain circumstances the tide does not respect the high tide mark. The object of the manœuvre is to put up a wall, not after one has been flooded by the sea, but before, in advance of the flooding rather than after it has happened, that being a precautionary rather than a funereal measure.
The only way to prove that the sea is coming up or will in certain circumstances come up beyond the normal high tide mark is to wait until the sea does so. If the Committee takes the view which my hon. and learned Friend has put before us one may erect a sea wall or embankment against an encroachment of the sea, not even the river above the

high tide mark, and then have to wait until the tide demonstrates its ability to flood above that point. That does not seem a reasonable thing to do, nor does it seem reasonable that the benefits under this aged Section should be restricted to cases when the water contains a certain amout of salinity rather than other forms of unpleasantness. I feel I must press the Amendment to a Division.

Question put, That "tidal" stand part of the Schedule:—

The Committee proceeded to a Division: —

Mr. PYM and Mr. MACARTHUR were appointed Tellers for the Ayes and Mr. MAXWELL-HYSLOP was appointed Teller for the Noes; but no Member being willing to act as second Teller for the Noes, The CHAIRMAN declared that the Ayes had it.

Amendment negatived.

Schedule agreed to.

Orders of the Day — Clause 16.—(ASSESSMENT AND COLLECTION OF TAX UNDER CASE VIII.)

8.30 p.m.

Mr. W. Clark: I beg to move, in page 13. line 32, at the end to insert:
Provided that tax charged under any assessment shall not be collected to the extent that the person assessed can show to the satisfaction of the surveyor that it will exceed tax on the rents or receipts to which the person has or will become entitled in the year of assessment.
I apologise for bringing the Committee back to the arid wastes of Schedule A. This is a simple Amendment. The Economic Secretary referred to it earlier. All that the Amendment seeks to do is to give the taxpayer the right to make a payment on account where his income under Case VIII has decreased during the year. It is on an actual basis and the income will be based on the previous year's assessment adjusted on the preceding 5th April, but there should be a right in the Bill for the taxpayer to obtain a reduction where the amount of property from which he is deriving an income has altered in any way.

Mr. Barber: Assessments under Case VIII are to be made on a current year basis, but in order to prevent delay in the payment of tax, this subsection, which my hon. Friend the Member for Nottingham, South (Mr. W. Clark) wishes to amend, provides that the Case VIII assessment for the year is to be


made in the first instance on the basis that sources of income and amounts of proceeds are the same as in the preceding year and the tax has to be paid accordingly on 1st January; but any necessary adjustments will be made after the end of the year when the figures are known.
That is a point in what my hon. Friend said. It could cause hardship if a landlord who disposed of some properties in the course of the year or preceding year nevertheless had to pay tax on an assessment based on the preceding year's income without allowance for this fact. But, for a reason which I will explain, I hope that my hon. Friend will on reflection agree that as drafted this Amendment goes too far. It would create a great deal of extra work and would cause delay in collecting the tax under Case VIII if tax due under what I might call a provisional estimate had to be held over just because of small estimated changes in expenditure.
On the other hand, this major difficulty would be met by a proviso excluding from the provisional estimate any receipts and outgoings in respect of premises which were disposed of before or during the year and not replaced by other premises.
My hon. Friend will, I think, appreciate that, for these reasons, I cannot advise the Committee to accept the Amendment in its present form, but I give an undertaking that on Report we will introduce an Amendment to go as far as we can and to deal with the more serious cases which have been brought to light as a result of the Amendment.

Mr. Mitchison: We will look at the Amendment when it is on the Paper.

Mr. W. Clark: In view of what my hon. Friend said, I beg to ask leave to withdraw the Amendment.

Amendement, by leave, withdrawn.

Clause ordered to stand part of the Bill.

Clauses 17 to 23 ordered to stand part of the Bill.

Orders of the Day — Clause 24.—(CHARGE ON SALE OF LAND WITH RIGHT TO RECONVEYANCE.)

Question proposed, That the Clause stand part of the Bill.

Mr. Barber: I am sorry to strike a discordant note, but if I say a few words I think it would be for the advantage of the Committee, and, indeed, of those outside. There is one point on the Clause which I should like to make clear. It is, as the Committee will have appreciated—not perhaps from our previous discussion but from reading the Clause —in the main an anti-avoidance provision. However, it has been pointed out that, as it is at present. drafted, it would apply to the case where property is sold and immediately leased back to the vendor. Hon. Members will know that this is a common type of commercial type of transaction these days and, as there is no interval between the sale and the lease, it cannot be contended that the transaction amounts to a lease from the vendor to the purchaser for a period in return for a disguised premium. We are considering how best to deal with this type of transaction, but I think that I should tell the Committee now that we shall table an Amendment on Report to exclude it from the charge which would otherwise arise under the Clause as it now stands.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Orders of the Day — Clause 25.—(PROVISIONS SUPPLEMENTAL TO SS. 22 TO 24.)

Question proposed, That the Clause stand part of the Bill.

Mr. Graham Page: I want to refer to subsection (5). Under Clause 22 a premium is chargeable if the lease does not exceed a term of 50 years. If the lease is granted for more than 50 years, the premium is not chargeable to tax. If the lease is granted for a period of over 50 years with an option to the tenant to break at 14, 21, or any number of years within 50 years, under subsection (5) the lease is treated as of that length and term—14 years or 21 years, at which the tenant has the power to break. The landlord may have no power to break if the option is given only to the tenant. The landlord may be bound to a lease of 50 years or more. Having granted a lease of that length, he would not be chargeable to tax on any premium that he took. The Bill as it stands puts


it in the hands of the tenant to decide whether the landlord is chargeable to tax.
I agree entirely that, if the lease can be broken at any period under 50 years by the landlord, it is right that it should be treated as a lease for that length of years up to the point when the landlord has an option to break to. I submit that when it is merely an option for the tenant to determine a lease and when the landlord, the person on whom the premium is charged to tax, is bound to allow the lease to run over the 50 years, it should be treated as a lease for a period exceeding 50 years, a lease the premium for which is not chargeable to tax.
Will my hon. Friend the Financial Secretary explain why in subsection 5(a) the words "or by the tenant" appear, with the result that, even though the lease may be for over 50 years and even though the landlord may be bound to let the lease run for over 50 years, it is treated for tax purposes as a lease for the period only up to the point when the tenant can exercise his option?

Mr. Bellenger: Is this a substantial point? Is it conceivable that a case like this could arise? For example, if a tenant has taken a lease over 50 years and has paid a substantial premium, surely he would not wish to do anything at 14 or 21 years or whatever period it may be, without trying to get some of his premium back. There might, on the face of it, be some justice in the hon. Member's contention, but I do not think that it is ever likely to arise.

Mr. Barber: Subsection (5) of the Clause contains provisions for determining, for the purposes of Clauses 22, 23 and 24, the length of the lease which may be cut short before it has run its full term.
I am sure that my hon. Friend the Member for Crosby (Mr. Graham Page), who is knowledgeable in property matters, will have appreciated immediately he saw these provisions that it was necessary to prevent an avoidance of tax on premiums under the formula set out in Clause 22(1) by dressing up a lease as one for a much longer period than that for which it is intended to run.
My hon. Friend referred in particular to subsection (5,a) which deals with the

case where a lease can be determined by notice by either the landlord or the tenant, at which event it
…shall not be treated as granted for a term longer than one ending at the earliest date on which it could be determined by notice.
The point which my hon. Friend has put to the Committee is one which occurred to us but, so far, we have not found it possible to deal with it in the Clause in any way which would not leave this part of the Clause wide open to avoidance of tax.
In view of what my hon. Friend has said we will certainly have another look at the matter; but I must in all frankness tell the Committee that, from the efforts we have made so far, it is fairly unlikely that we shall be able to find a way to meet my hon. Friend's point.

Mr. Mitchison: I hope that no way out will be found. I have observed that on the Notice Paper is a not-selected Amendment to the Clause in the name of the hon. Member for Crosby (Mr. Graham Page)--in page 23, line 14. The speech of the hon. Member for Crosby would appear to bear a very close resemblance to that he would have made had that Amendment been selected. I suppose that that is one way of doing it. I find the hon. Member's proposal somewhat curious. I can understand treating a lease for a given term of years one way or the other—either for the maximum or minimum where there is an option to break —but I cannot understand the difference it makes whether it is the landlord who breaks the lease at the first possible opportunity or the tenant.
I should have thought that for the kind of purposes we are now considering there can be no difference. I agree with the Financial Secretary that we are considering a matter relating to the three foregoing Clauses. The last two of them, if not the three, are obvious anti-avoidance Clauses. It is difficult, in those circumstances, to allow an Amendment to make a change on the lines suggested in the remarks of the hon. Member for Crosby. I should have thought that in an anti-avoidance Clause it was particularly unfavourable, and I trust that the Government will stick to their guns in this matter.
8.45 p.m.
These anti-avoidance Clauses are few in number. I am not referring to them


in particular, but one of them, apparently, has a fault in it which is to be corrected. I hope that two things will be done: firstly, that they are not in any way weakened, either by an Amendment of the Clause we are discussing, which refers to them, or by any Amendment made to the anti-avoidance Clauses at a later stage; and, secondly, I hope that the Chancellor of the Exchequer, if he gets another chance to introduce a Budget next year, will take this business of anti-avoidance a bit more seriously than the Bill appears to take it. We get up from the Opposition benches year after year and protest against the insufficiency of and-avoidance provisions, and the game seems to be at present that when the nefarious practice becomes sufficiently widespread the Government introduce a Clause to prevent it happening. It has that effect and the avoiders simply do it in another way.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Schedule 5 agreed to.

Clause 26 ordered to stand part of the Bill.

Schedule 6 agreed to.

Orders of the Day — Clause 27. — (COLLECTION OF OUTSTANDING SCHEDULE A TAX.)

Question proposed, That the Clause stand part of the Bill.

Mr. Mitchison: I should like an explanation as to what this Clause is about. The Government started the day quite well. They were to give us explanations on all sorts of things; we have had very few of them. We seem to be proceeding at too rapid a rate at present. We are not giving these matters the consideration which it is our duty to give them. This is not a sort of hopscotch race of the three Treasury Ministers with their legs bound together hopping along through this complicated Statute as fast as they can. They are taking off and putting on taxes. They are making people pay, and if they make a mistake the mistake may be an expensive one, and, more than that, it may, as appeared recently, be an unconstitutional one. Let us know what we are doing and what this Clause is all about.

Mr. du Cann: I am only too delighted to give the hon. and learned Gentleman for Kettering (Mr. Mitchison) some short explanation of this Clause. Speaking for myself, and, undoubtedly, for my hon. Friend as well, I was a bit disappointed that it did not seem as if the Committee wanted us to explain some of the earlier Clauses. Some of them, I thought, were rather neat and, having gone to a great deal of trouble in preparing happy little speeches, one hoped to have the opportunity of using them.

Mr. Mitchison: The hon. Gentleman offered to do this. It was up to him to do it. It was not up to us to dash into this foaming torrent of Clauses and try to stop the torrent on its way. It is his business.

Mr. du Cann: What the hon. and learned Gentleman says is entirely right, but having spent a short and undistinguished period in the Navy during the war, I learnt never to volunteer for anything, even if I felt like it.
If the hon. and learned Gentleman will be good enough to read HANSARD tomorrow he will find that I said at the beginning that we were only too ready to give an explanation in appropriate cases, and he will agree—to be serious—that the majority of these matters that we have discussed so very quickly are entirely straightforward. I would not wish him to think that we were treating him with any discourtesy.
This Clause relates to Schedule A assessments made after the end of 1963–64 in respect of the tax for that year and previous years. The position is that although Schedule A assessments are normally made in the year to which they relate, some assessments are made later, for example, on a newly-erected house, because the facts are not known until subsequently. It is necessary to provide for that position and that is what this Clause does. I hope that the hon. and learned Gentleman and the Committee will think it an appropriate and proper provision to make in order to look after this slightly unusual situation.

Mr. Mitchison: I feel sorely tempted to describe the Clause as fiscal Choctaw. I wonder whether the Treasury could sometimes consider settling down and


doing a suitable exercise in making sentences as short as possible and using a short word instead of a long one in so doing. I am sure that if that were tried there would be a good result which would be more intelligible to the taxpayer who otherwise is tempted to suppose that this is a region the language of which he does not know, and in which he must make no excursion, paying his taxes rightly or wrongly without the foggiest notion of what it is all about.

Mr. du Cann: I see that the hon. and learned Member is a disciple of Gowers, and so are we at the Treasury. I have every sympathy with him and have no hesitation in giving him the assurance for which he asks.

Mr. Bellenger: I imagine that the assessments which the hon. Gentleman said would be made after 1963-64 would be few in number. It might well be that an occupier against whom the Inland Revenue would seek to recover tax—because it is recovered against the property and the occupier as a rule—could not recover the cost of the tax for which he might be liable. Do I understand that in these circumstances, if he has no right against his landlord to recover the tax, the Inland Revenue would abandon the claim?

Mr. du Cann: I apologise for making this mistake a second time today. I can give the right hon. Gentleman similarly an unqualified assurance that that point will be dealt with, because the Clause specifically provides that where taxation is recovered from the occupier, in default of payment by the landlord, he is not required to pay tax which he cannot recover by deducting it from rent.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Orders of the Day — Clause 28.—(AMENDMENTS AS TO SCHEDULE B.)

Question proposed, That stand part of the Bill.

Mr. Mitchison: This Clause ought not to pass without comment. We have given Schedule A what I might call a full-dress State burial. This Clause seems to me to represent the disappearance of another little Schedule, perhaps to be buried in some paupers' sanctuary.

But we must consider what is happening. To start with, the gap in the alphabet of Schedules will remain for years to provoke historians and economists into inquiries as to what on earth their forefathers were doing about Schedule B. When they come to search for what they were doing, how much will they really find? I am puzzled about what is to happen over Schedule B.
I can see the words and the effects of the Clause, but what does Schedule B cover now? It covers woodlands not on a commercial basis and not dealt with under Schedule D. I have no doubt that it covers a number of other curious things, but I do not know what they are. When the Schedule disappears, what exactly happens? What will be the cash effect one way or another of the removal of Schedule B or of the effect of the amendments to it? Does it survive? If so, to what extent and to what purpose? We have had two unqualified undertakings in about the same number of minutes on the last Clause. Let us see whether we can beat that here and get three.

Mr. Barber: I am sure that I shall be able to satisfy the hon. and learned Member completely. Schedule B will remain. It is not to be abolished. The Clause abolishes tax under that Schedule except, as the hon. and learned Member will see from the words of subsection (1), for commercial woodlands in cases where the occupier has not elected to be taxed under Schedule D. It also provides new machinery for determining annual value under Schedule D for commercial woodlands, and re-enacts in relation to land assessed under Schedule B the provision for taxation of income from easements which formerly applied to all land assessed under Schedule A.
As the hon. and learned Gentleman well knows, Schedule B is charged in respect of the occupation, as distinct from the ownership, of land in the United Kingdom other than dwellinghouses or land used for a trade. It was the Schedule under which farming profits used to be taxed but, since the year 1949–50, all farming profits have been brought under Schedule D. This means that tax under Schedule B is now chargeable only on occupiers of gardens of over an acre, parklands, sports grounds, sand


and gravel pits not run on a commercial basis, non-commercial woodlands, commercial woodlands where the occupier has not elected to be taxed under Schedule D, and few other limited classes of property such as slag heaps and local authorities' sewage farms.
The charge is on an "assessable value" defined as one-third of the annual value, as determined for the purposes of Schedule A. There are now, I think, only about 30,000 items of property assessed under Schedule B, and the yield is not much over £100,000. So the cost of the abolition of Schedule B, except for commercial woodlands, is about £100,000.

Mr. Mitchison: Is it worth keeping the poor thing—an attenuated wraith derived from some ancient enactment or another? Do we want it any more? I have here the Royal Commission's final Report—published eight years ago—of which paragraph 926 states:
… we are not satisfied that (save in the case of commercial woodlands) there are any grounds of principle which would justify the continued imposition of the Schedule B charge.
There is another sentence:
In the circumstances, we recommend the abolition of Schedule B. Commercial woodlands would, of course. continue to be charged bat this might be effected under Schedule D…
Then there is reference to other matters, but what the Commission said is quite clear. And why not? I should have thought that this was a case where the Government had no doubt hesitated to kill but certainly need not have strived officiously to keep Schedule B alive, which seems to be exactly what they have been doing.
Whether or not commercial woodlands are assessed under Schedule B depends on a past election. I speak off the cuff, but I think that I am right in saying that in many of these cases, if the election has not been made it is now too late to make it. Whether that is so or not, the distinction between Schedule B assessment and Schedule D assessment of commercial woodlands was, I should have thought, in most cases nothing much worth preserving as that, and that the Government might have gone the whole hog and killed and buried the thing. Indeed, I thought for a moment that they had done so, but they apparently have not.
The oddest collection of things emerged. There was something about easements. I do not know how much money one gets out of an easement, but I suppose that it is much about the same as, in some cases, one gets out of a house under Schedule A. If the house is small enough and the easement is large enough, that might be all right, but where is the logic in doing away with Schedule A and continuing easement?
What do we tax when we tax an easement? What is the basis of assessment? When we assess an easement, what do we do with profit undrawn—is that also assessed under Schedule B? And what about these famous sewage farms? Is there not any other way of dealing with them? Are we to confuse the whole structure of the Income Tax Acts for the sake of a few easements and sewage farms, and commercial woodlands where the owner has not elected to be taxed under Schedule B?
Surely this matter should be considered again. I know that it takes time for any Government to act on the Report of any Royal Commission, but this was not a heavyweight one. What is the advantage of beginning the alphabet with B instead of C?

9.0 p.m.

Mr. Barber: I do not think that this point is as simple as the hon. and learned Member for Kettering (Mr. Mitchison) has suggested. The option of taxing commercial woodlands under Schedule D or Schedule B will remain for the future. It can be exercised in the future in the same circumstances in which it could be exercised in the past. I realise that it is tempting to accede to the advice of Royal Commissions on occasion, but we must consider what the consequences of doing so would be. One consequence in this case would be that we should change the whole basis of assessment of commercial woodlands, and my right hon. Friend decided that, in the circumstances of this year, he did not wish to do so. That is the principal reason why Schedule B remains.

Mr. Bruce Millan: Can the hon. Gentleman say why the Chancellor of the Exchequer decided that he should not make this change? The hon. Gentleman has said that the right hon. Gentleman decided to leave things as they were. Why?

Mr. Barber: As the Committee will appreciate, there are many matters which have not been covered in the Bill, but we are making more changes this year than usual. If I were to give an explanation of every aspect of taxation which my right hon. Friend has decided not to change this year, I should take a very long time. My right hon. Friend, like his predecessors, considers the whole field of taxation every year. He did not think that, in all the circumstances, he should change the law relating to the taxation of woodlands
.
The hon. and learned Member for Kettering referred to easements. What I had in mind was subsection (3), which re-enacts for Schedule B lands the provisions which were formerly contained in another section of the Income Tax Act, 1952, a Schedule A provision which is now being repealed, for taxation under Schedule D of profits from payments for easements over or rights to use the land in question in so far as they exceed the assessable value of land under Schedule B. It is convenient now to have the provision in its place in Schedule B.
This is only a drafting Amendment. We are doing what the hon. and learned Member for Kettering asked my hon. Friend the Economic Secretary to do a few minutes ago, namely, to try to make the Bill a little more intelligible, and it is for that reason only that we have included this provision.

Mr. Mitchison: This is most unsatisfactory. We are told that the Chancellor of the Exchequer has considered this technical and somewhat difficult problem small though it is, with great deliberation. When the Financial Secretary is asked to give the reasons which led the Chancellor to come to his decision, he says, in a manner reminiscent of Louis XIV, who said, "I am the state", that he will not do so. The result is that we are left with this weird little schedule, hanging on by the skin of its teeth, nearly dead and buried but not quite, operating on a variety of small things, including the remarkable one of commercial woodlands, not assessable under Schedule D.
Is it worth keeping this provision and disregarding the recommendation of the Royal Commission on a matter of

this sort? Is it worth hanging on to this decaying peg something which used to hang on Schedule A, which is being abolished? It is obvious that this provision will have to go. I should not rate highly my powers of criticism of an Income Tax Act, but I would pay some attention to a Royal Commission's Report on a matter of this sort. I know that it takes about eight years to sink into the Government's head, but they have had eight years and I consider that long enough.

Mr. Barber: I do not know whether what I am about to say will commend itself to my right hon. and hon. Friends, but I should point out to the hon. and learned Member for Kettering (Mr. Mitchison) and to hon. Members opposite that the whole question of the taxation of commercial woodlands was considered in years gone by by Lord Dalton, who, after careful consideration and, I believe, discussion in the House, came to the conclusion that the existing option as between Schedules B and 13 should remain. While that may not be a precedent which will commend itself to my hon. Friends, I hope that it will commend itself to the hon. and learned Gentleman.

Mr. Mitchison: The Royal Commission reported in 1955. I do not carry all these dates in my head, but it would be interesting to know whether the Labour Chancellor of the Exchequer of those days had that Report before him. The abolition of Schedule A makes a difference and this seems to me to be the wrong moment to choose to keep Schedule B alive and to make this Amendment, hanging on to what used to be in Schedule A. It is not something which can be done by rejecting the Clause or something which can be done in five minutes, and, possibly, it will not be done this year, but I hope that it will be considered. It looks like a rather absurd bit of clinging on to relics and to venerating them.

Mr. Barber: May I put it this way. We considered both the Report of the Royal Commission and the reasons which commended themselves to Lord Dalton. I put them in that order with no disrespect to him. As to the complete abolition of Schedule B, the hon. and learned Gentleman will, I am sure, agree


that the important aspect to consider is not so much whether the Income Tax Acts would look tidier without Schedule B, but what the effect of complete abolition would be on the taxation of certain profits. It was that to which we directed our attention.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Orders of the Day — Schedule 7.—(ASCERTAINMENT OF ANNUAL VALUE.)

Question proposed, That this Schedule be the Seventh Schedule to the Bill.

Mr. Mitchison: I want to know a little more about the Schedule. Am I right in supposing that this Schedule, which lays down the basis for the ascertainment of annual value, produces a basis of valuation similar to that which used to exist both for Schedule A purposes and for arriving at gross valuations for rating purposes? It looks to me to be exactly the same thing. If that is the case, the Government should tell us that the Schedule A basis of assessment is being kept in the cases to which this Schedule refers, which include, for instance, the estate eases that we considered so carefully under the Fourth Schedule

Mr. Barber: The rules laid down in this Schedule are the same as those for ascertaining gross value for the purposes of valuation for rating in England and Wales. The Schedule lays down the rules for the ascertainment of annual value for Income Tax purposes under Schedule B as it applies to commercial woodlands to which we have just been referring; under Schedule E as it applies to the value of accommodation provided for the holder of an office of employment; and to claims for maintenance relief under Schedule A for 1963–64 or to Case VIII for 1964–65 and subsequent years where the annual value of an owner-occupied property has to be brought into the computation as a condition of allowing relief for the maintenance expenses against the rents of the surrounding estate. These are the circumstances which are dealt with in Clause 20 and Schedule 4.
The hon. and learned Gentleman is quite right in thinking that, with commercial woodlands in general, the new

method of ascertaining annual values under Schedule B is not expected to result in any material change of actual amounts of Schedule B assessments.

Mr. Graham Page: On reading Schedule 7, it looks very much as if annual values under certain parts of this Bill will be the same as rateable values. If that is the case, it is rather shocking, because the results will be about three and a half times to four times as much as the present annual values. Where this is to apply, particularly where there must be an election under Schedule 4, I wonder what the point will be if the amount which can be set against it is the new annual value.

Mr. Millan: I understood that Schedule A values were still on the 1936 or 1937 basis. Surely, if we are to bring annual values up to the 1963 or a subsequent year basis we cannot get the same result as we would by taking Schedule A values as they are at present.

Mr. Bellenger: Another point is that the recent revaluation for rating purposes is putting rating values extremely high. Part of the purpose of doing this was to reduce the rate poundage so that the rates paid by the ratepayer would not be so excessive compared with previous rates. We know, however, that it is excessive —greatly excessive in many cases—compared with what the ratepayer has hitherto paid. If that basis is to be taken for the value of an hereditament, particularly under Clause 45, in cases where the occupier is in the house or hereditament by virtue of employment, it seems to me that the greater burden on the taxpayer under the present rateable values will be considerable.

Mr. Barber: Obviously I cannot anticipate Clause 45. But I made it clear earlier that Schedule 7 applies not only to Schedule B but to Schedule E, since it applies to the value of accommodation provided for the holder by reason of his office or employment. It may well be, in certain circumstances, that the value as determined by Schedule 7 is higher than the existing, out-dated Schedule A valuation, and it may be argued whether this is right or wrong in relation to the charge under Clause 45.
The hon. Member for Glasgow, Craigton (Mr. Millan) expressed doubt about the conclusions I have drawn con-


cerning the valuation of commercial woodlands under Schedule B. He suggested that if the new valuation is different as laid down in Schedule 7, then the valuation of woodlands under Schedule B will be higher than in the past.
The answer is that annual values on the old basis have not kept pace with the general increase in property values of woodlands, and that these assessments in respect of commercial woodlands will normally be left undisturbed, certainly while conditions remain as they are. It was for this reason that when I moved the Second Reading of the Bill I pointed out that in general the change was not expected to result in any material difference in the actual amounts of Schedule B assessments of commercial woodlands.

9.15 p.m.

Mr. Graham Page: I am sorry to press my hon. Friend again on this, but it is serious. If an owner is to be entitled to make an election as to whether he goes on a five-year basis for maintenance or takes the actual right away, he will be left in doubt about what is to be the figure against which he can set his maintenance and repairs claim. Apparently, the net annual value figure is to alter at the moment of the passing of the Bill. The valuation for Schedule A will go and Schedule 7 will be substituted, but the owner will not know what that figure will be.

Mr. Barber: Under which Clause is there provision for the election to which my hon. Friend refers?

Mr. Graham Page: In the margin to Schedule 7 it is said that Schedule 7 applies to Schedule 4. In Schedule 4 there is the machinery for the election, particularly in paragraph 7. If my hon. Friend tells me that the Schedule does not apply at all to the question of election to carry on on the five-year basis, I am happy, but I think that the reference to Schedule 4 should then be deleted from the margin of Schedule 7.

Mr. Barber: As I understand it, Schedule 4(7) gives an option to claim maintenance on a five-year average for this transitional period. I do not think that there is any doubt or misunderstanding about that. However, in Schedule 7 we are concerned only with how the

annual value is ascertained for the various purposes to which I have been referring. I cannot see that there is any inconsistency in the two provisions. All I can tell my hon. Friend is that when I looked at paragraph (7) originally, which was some time ago, it seemed to me that there was an advantage in having an option to claim maintenance on a five-year average for the transitional period. I think that this is so.

Mr. J. T. Price: The Committee is right to pause for a moment in its consideration of Schedule 7. I am not so much concerned with the theoretical and marginal arguments about commercial woodlands, but I am concerned with the much more important impact of the Rating and Valuation Act, 1961, on house property. Millions of people are now finding that rateable values have been increased by very large amounts, 250 to 500 per cent. in some cases.
Does the Financial Secretary remember that when the Rating and Valuation Act was being considered in Standing Committee, a Committee of which I was a member, so that I can speak with some knowledge of what took place, we strongly pressed the Minister then in charge about what would be the likely outcome of bringing property valuations, including house property, up to what were called present-day values in view of the grave housing shortage and the collapse of control under the Rent Act? Those are factors which the Treasury likes to brush aside. Until the reform of the law 10 or 15 years ago, rating and valuation matters were for local decision. They were fixed by valuation courts which functioned in the localities.
Now the whole of the valuation machinery is under the control of the Treasury. When the Minister was challenged on the possible impact of the new Rating and Valuation Act, under pressure from my hon. Friends and myself, he took certain powers to protect himself and his Government against the political repercussions of millions of people finding themselves faced with greatly increased assessments. He took powers to give a remission if the valuations produced hardship. There are powers in that Act under which the Minister can grant a partial remission of the full impact of the rateable value.
So far the Minister has not seen fit to avail himself of these powers. No doubt as we get nearer the General Election and the public begin to realise more intensely than they do now just what has hit them the Minister may be forced to use these powers. In other words, he may be forced to reduce the assessable basis for a temporary period up to five years to assauge and mollify the public criticism which will be hurled at his head.
The Financial Secretary is no doubt aware of this, and I do not wish to be unfair to him or to bore the Committee with a recital of what has happened, but perhaps I might direct his attention to another aspect of the problem, and I hope that I shall not be off beam in raising these general considerations. This fixes not only the basis of the rates to be levied by the local authority on the basis of the new valuations, but the basis of the tax payable under Schedules B and E.
I am not much concerned about the type of things that fall under that, but I remind the hon. Gentleman and the Committee that when we say,
The annual value shall be taken to be the rent which might reasonably be expected to be obtained on a letting from year to year.
this is the theoretical notion behind the Schedule A tax which I had the honour of criticising in the House, perhaps to the discomfort of some of my hon. Friends who have purist views on this, and this theoretical notion goes haywire while there is a shortage of houses. It is not possible to apply theoretical considerations to valuations if there is no free market in housing.
This is the sort of thing that is being built into the new legislation to give effect to the impact of the 1961 Act without giving any consideration to the fact that there may be a sitting tenancy, with the result that the valuation of the house, as decided by the Ministry's officials, will not be a true valuation, because a true valuation can be arrived at only if there is a free market and there is no control over the tenancy.
I think that we are entitled to a fuller explanation of what is behind this and how the Minister proposes to deal with the situation that will arise now that Schedule A is to he discarded under the proposals of this Budget. How will the Minister apply the new valuations to

people who were hitherto subject to Schedule A? How will the Minister apply the new valuations to Schedules B and E without taking into account some of the things that I have mentioned?

Mr. Barber: I think that the hon. Member for Westhoughton (Mr. J. T. Price) has, with respect, misunderstood the way in which this Clause will operate, and also the extent of its operation. The Clause is concerned with the ascertainment of annual values, first, for the purposes of Schedule B as it applies to commercial woodlands. I have already said that, as far as we can see, this is not expected to result in a material change in the annual amounts of Schedule B assessments on commercial woodlands. I assume that the hon. Member is not particularly concerned about that.
The next matter concerns claims for maintenance relief under Schedule A where the annual value of an owner-occupied property has to be brought into the computation as a condition of allowing relief for the maintenance expenditure against rents of the surrounding estate. I do not believe that the hon. Member was in the Chamber when we discussed this sort of case earlier this afternoon. An example is the case of a mansion house and surrounding property, all of which has been assessed as a single unit. If we did not make provision for dealing with that case the owner of the house, provided that it, together with the surrounding land, is in his occupation, would suffer a significant loss—in other words, a tax increase—unless we had taken steps to deal with the situation.
Knowing the hon. Member—with whom I once spent a night in the desert a few years ago—I do not suppose that he is specially concerned with the taxation of mansion houses. All that remains are the provisions, of considerable importance, which are contained in Clause 45, and which deal with Schedule E, concerning the valuation of accommodation provided for the holder of an office of employment. In other words, Clause 45 deals with the case where a house is provided for, say, a director, a senior executive or an ordinary workman, either rent-free or at a rent less than the annual value.
In those circumstances, bearing in mind that the tenant who lived in his house rent-free or at an uneconomic rent in the past was liable to tax under Schedule A, and had to pay tax under that Schedule, he has to be assessed to tax in some way, as Schedule A is being abolished.
When we deal with Clause 45 we can consider whether the new basis of taxation under Schedule E, replacing the Schedule A basis, is reasonable. I cannot anticipate Clause 45 to a greater extent than that.

Mr. Bence: Will the hon. Gentleman explain paragraph (2), which reads as follows:
Section 6 of the Rating and Valuation Act, 1961 (adjustment of gross value by reference to provision of or payment for services etc.) shall apply for the purposes of the foregoing paragraph, and in relation to land in Scotland …
and so on? Scotland has a different rating and valuation system. It is under a different Act of Parliament. Will the Financial Secretary explain why properties in Scotland should be assessed under an English law? As I understand it, the assessors for rating and valuation purposes in England and Wales are the Commissioners of Inland Revenue, whereas Scotland has county assessors on the advisory council to the Secretary of State for Scotland.
We do not have the Lord Advocate here, but I have no doubt that the hon. Member has been briefed from the Lord Advocate's Office in Edinburgh, and have no doubt that he can give the Committee—and also the electors of Scotland—an assurance that as a result of the operation of this paragraph Scottish property owners will not have to pay far more tax under the new valuation than under the Scottish Rating and Valuation Act. We who represent Scottish constituencies—at least on this side of the Committee—are entitled to know the answers to these questions.

9.30 p.m.

Mr. Mitchison: I agree with what has been said by my hon. Friend the Member for Dunbartonshire, East (Mr. Bence). This is a case of applying English legislation to Scotland by a side wind. If we had a Scots Law Officer in the Committee he could have seen to the matter. It is applying the provisions of what will

be a Section of an English Act to land in Scotland as if the legislation extended to the whole of the United Kingdom. That is a very sloppy way of doing things. It required at least one Act of Union to bring the two countries together. For the Treasury now to suppose that English legislation can be applied to Scotland in this manner is not only an insult to that country but it will be a fruitful source of confusion when the legislation comes to be worked out. For some purposes we shall have to look at the English Act and for others we shall have to look at the Scottish Act, and the only safe place to live will be on the Border when one will be able to hop about from one side to the other without much difficulty. That is a situation which ought to be attended to.
There is a serious point which arises here, and I have put this matter to the Government once or twice before. I will put it again. It seems to me that what the Government are trying to do is value land for the purposes which the Financial Secretary explained to us on the same basis as valuations for rating purposes. I am getting more and more obstinate and it will now require a lot to convince me that that is right. If it be the position, one must remember a little of the history. What has happened is that until rating valuation was changed from what I think we might call the pre-war hypothetical value to the present current value basis—I am talking about dwelling houses—the Schedule A valuation and the valuation for rating more or less went hand-in-hand in practice though possibly not technically so.
Then the assessment for rating was raised to the current value, and that has been a bit of a shock to some people, largely because they got their assessments before they knew what the poundage Was to be. But it has caused a lot of feeling and a great deal of indignation. Poujadists have popped up and objected to both local and central Government in any and every form, and we do not want to encourage them too much. When the change was made in rating the Government for the time being froze the Schedule A values and if I get the figure right the freezing is now thawing out, and they are to be valued at a proper percentage value on the same basis as for rating. This makes for some difference.
I refused to be pushed into commercial woodlands like this, to wander about in a jungle of profit-making spinneys and thickets and so on. I am more interested in the Schedule E taxpayer who is taxed on the house which he occupies for the purposes of his job and who knows the position. He has to pay whatever the tax is and, therefore, it seems to me that in his case where the valuation is an actual taxable item and not, as in some other cases, a deduction one has to look rather carefully at the matter. He is to have that part of his assumed income pushed up sharply. After all, this man is in some ways like the Schedule A owner-occupier. We have been told that here is a man who has had to pay on the value of a house without actually getting the money on which he is assessed for tax purposes.
I hope I am right; I shall be corrected if I am wrong. I am thinking of the Schedule E taxpayer who has to pay in respect of a house. One does not wish to invite too many nasty comparisons between the man now losing his Schedule A liability and the one who finds that his house, the same object from the taxation point of view, is being increased in value. So far as valuation is concerned, this has had some practical effect. The Government put into the Rating and Valuation Act provisions for softening the wind to the house occupant. Power was given to ease off during the first five years the additional burden it was expected that he would have to carry.
Taken over the whole country it is arguable how serious the additional burden has finally proved, but one must admit that there have been hard cases. One wonders whether as this additional burden is put on in this way on the Schedule E employee there ought to be something to help him on the same sort of lines as help might have been given—and power was taken to give it—in respect of rating valuations. My hon. Friend was quite right in pointing out this difference and the Government ought to consider it.
The present position is that the Schedule A valuations are frozen and new rating valuations have actually been made by the Inland Revenue so that we get these two parallel but very different figures. No doubt if the Inland Revenue were called upon to value the same thing

twice on the same basis it might arrive at the same result. All the more ridiculous is it that we should not recognise that in the statutes and make it clear that the same valuation will serve for both purposes. If we do not do so we might get into trouble.
I must not anticipate what comes later in the Bill, but there are provisions about appeal. Those provisions relating to Income Tax in this case, are quite different from the provisions relating to appeal in connection with rating valuations. Therefore, unless the Inland Revenue valuers take some rather arbitrary line we shall get a great deal of divergence owing to the human divergencies between the views of the appeal tribunals concerned in the one case with tax and in the other with valuation. This muddle is unnecessary. We are trying to arrive at the same figure for the same thing. There is no reason whatever to do it twice and make things worse by providing an opportunity for a divergence year by year, which is sure to arise in a number of cases. I do not like this jungle of possibilities. The Government ought to think about this question as partly one of justice to the taxapayer and partly one of not unnecessarily overburdening an administration which has quite enough to do already.
The election in the Fourth Schedule is not a general election but a collection of local elections. I am afraid I misled the hon. Member for Crosby (Mr. Graham Page), who was on his feet at the time, by referring to the wrong election. The right election is not the one in paragraph 7, but the one in the preceding paragraph, in line 9 on page 71. If we insist on having local elections all over the place we must abide by the confused result which sometimes comes from them.

Mr. Barber: May I try to deal with the three or four points which have been raised since I was last on my feet?
In the first place, the hon. and learned Member for Kettering (Mr. Mitchison) said that he was concerned about the person who had to live in a house because that was necessary for his job. Before you came into the Chair. Sir William, I explained at least twice that I could deal with the point satisfactorily only by anticipating Clause 45, which is


concerned with the Schedule E taxpayer—the very limited number of Schedule E taxpayers who live rent-free or in houses at rents below the actual value.
In respect of the person about whom the hon. and learned Member is concerned, the charge will extend only to people who are in law occupiers, and this term excludes an employee such as a bank manager who must live on bank premises or a farmworker in a tied cottage. These are the people about whom the hon. and learned Member is particularly concerned.
The hon. Member for Dunbartonshire, East (Mr. Bence) said that he was concerned with the possibility of a further increase in taxation for house owners in Scotland. The only house owners to whom this Schedule applies are the owners of mansion houses. Nobody else in Scotland is involved. It concerns only the owners of mansion houses who live on an estate which is assessed, and has been assessed in the past, for Schedule A tax as a unit. In view of the way in which we are dealing with these individuals, I think that on the whole we have dealt with the matter fairly. I think that if the hon. Member looks at the debate on this matter which we had previously and reconsiders the point, he will feel that we have dealt with it fairly.
The hon. and learned Member asked whether the valuation for the purposes of these various Clauses as laid down in Schedule 7 would be the same as for rating purposes. He thought that it would be rather odd if we had people going round valuing for the purposes of this Schedule and also for rating, and that there might be natural human divergencies, because valuation is not an exact science, as I have learned from a number of letters which I have received from hon. Members recently.
In determining annual values for the purposes of the Bill the inspector of taxes and the general commissioner for the division in which the land is situated, who under Clause 30 constitute the appellate body in the case of an appeal, will apply the principles laid down by English law for the determination of rating assessments, but they will not be bound by the figure in the rating valuation list, which will necessarily have been arrived at on

the facts of a year earlier than the year to which the Income Tax assessments relate. I see the hon. Member for Sowerby (Mr. Houghton) nodding his head in assent. He knows that in practice the rating assessment would normally be followed unless before the next revaluation it fell out of line with current values. There is that minor difference.

Mr. Houghton: Which it could easily do. If the rating revaluation is five years back and the valuation in the quinquennial year is two years old to start with, obviously there could be substantial changes in the years between the fixing of the valuation for rating purposes and the true valuation for the purpose of determining the amount of payment in kind in a number of cases to be assessed under Schedule E. Part of our difficulty is that we are looking at Schedule 7 without realising that Clause 45 is as much an anti-avoidance Clause as anything else.

Mr. Barber: I do not know whether I will go as far as that. I did not wish to anticipate the discussion which we shall have on Clause 45 or to be provocative to any section of the Committee.
9.45 p.m.
The last question I was asked, by two hon. Members, concerned the change in the law as it applies to Scotland in paragraph 2 of the Schedule. Although rating law, as I understand it, in Scotland and in Northern Ireland, which is also referred to, differs in certain respects from rating law in England, the principles for determining income values will be the same throughout the United Kingdom. This is a departure from the law and the practice which has hitherto prevailed under Schedule A, because in Scotland the figure in the valuation roll was normally regarded as conclusive for Schedule A purposes and in Ireland, I am told, the rating assesement was conclusive by Statute. Under Section 19 of the Finance Act, 1957, the figures were frozen at those in force before the Scottish revaluation of 1961 and the Northern Irish rating revaluation of 1957, pending a decision on the future of Schedule A generally.
The definition of gross annual value in Section 6 of the Rating and Valuation Act, 1961, referred to in paragraph 2 of the Schedule is, I can assure the hon. Member for Dunbartonshire, East, not very different from the English definition.
With that assurance, I hope that I have answered the various points which have been raised in a debate which has been quite a long one and which started with a minor reference to the taxation of commercial woodlands. If the Committee will not think that I am being too corny, I hope that I have done something to enable us to see the wood for the trees.

Question put and agreed to.

Orders of the Day — Clause 29. — (CASES I AND II OF SCHEDULE D: AMENDMENTS IN RELATION TO LAND.)

Mr. W. Clark: I beg to move, in page 25, line 18, at the end to insert:
Provided that the deductions which apart from the provisions of this subsection would have been made in respect of the annual value of the said land in computing profits or gains under Case I or Case II for the years 1963–64 and 1964–65 shall be aggregated and deducted as if the aggregate sum were an expense of the trade, profession or vocation for a period commencing on the date on which the said land ceased to be used for the purposes of the trade, profession or vocation and equal in length to the period to which the annual value so aggregated related.
This is another and very important point which arises only, I hope, because the Government have overlooked it. Because of the abolition of the old Schedule A, some business men will be penalised. Put briefly, as the Clause is drafted, it is clear that no deduction for net annual value of owner-occupied business premises may be made for 1963-64 onwards. Hon. Members will know that, when business profits are computed, the net annual value of any premises that have been occupied and on which Schedule A has been paid can be deducted from the profits.
There is an inequity here. Where net annual values have been increasing, or where the property has been purchased during the basis year of the accounts which have determined the year of assessment, the inequity is that the owner of the business will not get the full amount of relief against his Schedule D, Case I, profits, in connection with the net annual value.
At this hour of the evening, after such a lengthy debate on Schedule A, with all its ramifications, I should not like to take up the time of the Committee in giving examples. It is regrettable that back benchers are not able to have their

examples circulated in the OFFICIAL REPORT. If my hon, and learned Friend the Solicitor-General is to reply, I can prove to him arithmetically that there is an inequity here. I hope that the Government will look at it, because I am certain in my own mind, and I hope I am right, that in abolishing Schedule A the Government did not intend to create this anomaly by which business men will suffer.

Mr. Diamond: I rise only to ask the hon. Member for Nottingham, South (Mr. W. Clark) to be good enough to explain what his Amendment is intended to mean. Some of us have difficulty in understanding the Bill, let alone the Amendment. In any case, I do not think that the hon. Member formally moved it.

Mr. Clark: I am sure that when the hon. Member for Gloucester (Mr. Diamond) reads the OFFICIAL REPORT tomorrow he will note that I said at the beginning of my remarks "I beg to move" and then used the phrase "the words on the Order Paper." I could have read the words out to the Committee, but I thought that it would save time if I moved the Amendment in that way. I am delighted to hear that the hon. Member for Gloucester is confused by a Bill. To be frank, I am confused not only by the Bill but by some of the Amendments I am trying to move.
I thought that I had explained that my Amendment is merely designed—and I do not claim any special responsibility for its looseness or bad drafting—to clear up one matter. Since the Government have given sympathetic consideration to a number of Amendments during the Committee stage I hope that that is indicative of the fact that they are not too worried about draftsmanship but are more concerned with the spirit and principle of Amendments. Naturally, if the Government Front Bench accept the spirit of an Amendment they can get the Parliamentary draftsmen to further complicate the matter at a later stage.
In the Amendment I am trying to prevent an anomaly. Where one gets an increasing net annual value for business premises or where business premises have been acquired in the last two years, the business man will not be able to take into full account from his Schedule D profits the total net annual value that he has paid. I hope that my remarks have


not confused the hon. Member for Gloucester. I see him listening to me with even greater interest than before and that is some encouragement. I hope that the Government have taken the point of the Amendment and will accept the spirit of it.

Mr. R. Gresham Cooke: There is an injustice here and I was surprised to hear about it. It seems that now that Schedule A is being abolished the annual value accrued last year and which one would have got deducted against one's Schedule D this year, will not now be deductable. I understand that to be the case and I have great pleasure in supporting the Amendment.

Mr. Bellenger: Like other hon. Members, I could not quite understand the remarks of the hon. Member for Nottingham, South (Mr. W. Clark) when he first moved his Amendment. Is this not a case where the owner-occupier of business premises was allowed to deduct the net annual value from his Schedule D profits, but he had already paid Schedule A tax? Was it not rather like taking money out of one pocket and putting it into another? I may be wrong, but I do not think that the owner-occupier was exonerated from paying Schedule A tax and, for that reason, I suppose that he was allowed to deduct it from his Schedule D profits.

Mr. McMaster: There would appear to be a substantial cause for grievance. I do not pretend to understand this matter as fully as some of my accountant friends, but many representations have been made to me by business friends and accountants in my constituency who say that they have cause to worry about the provision. Since my own understanding of the matter is limited, it may assist the Committee if I read a passage from one of the letters I have received rather than try to interpret the correspondence in my own words. It states:
Previously Schedule A tax paid on premises owned and occupied for the purposes of a trade has been regarded as a payment on account of the trader's liability, because the Schedule A assessment has been a deduction in computing the liability of his profits under Case I and Schedule D.
The following passage may be of assistance to hon. Members:

The effect of Clause 29(1) is to deprive traders of the right to deduct their Schedule A assessments for the year 1962(63 and in most cases, depending on the accounting date, for a proportion of 1961/62.
It is on the following part of the letter that I should like an answer from the Treasury:
The hardship does not arise until the premises cease to be used for the purpose of the trade and the Amendment is designed to put the trader in the same position as he would have been if Schedule A had not been abolished for owner-occupied business premises.

The Solicitor-General: Clause 29, to which this is an Amendment, deals with amendments to the computation of business profits under Cases I and II of Schedule D which are required in consequence of the new system of taxation on real property. This is consequential to that extent.
I agree with my hon. Friends, who have raised this matter in this Amendment, that there appears to be a problem here as the Clause is at present drafted, and an inequity could arise. The Amendment deals with the question of the deduction to be given in computing the trade profits for the Schedule A assessment on the trade premises. Hitherto, the trader, who is also the owner, has paid tax on the annual value under Schedule A and has been entitled to deduct the annual value in computing the profits for assessment under Schedule D.
Now that Schedule A is abolished Clause 29 provides—and this is one of the consequential provisions—that there shall be no deduction for annual value in computing trade profits. That applies in 1963–64, and therefore he cannot deduct the Schedule A tax for 1962–63 in computing the profits assessed for 1963–64; although in most cases the Schedule D assessment on profits is in fact based on 1962–63. I accept that there is a problem here. Whereas in most cases this may produce a proper result, nevertheless, I think that this is a matter that needs considerably more study.
My hon. Friend, who spoke with the voice of Esau, accepted, I think, that here was a problem for the business community, but that the Amendment itself is not satisfactory for reasons which I think are certainly apparent. It would be


too wide. It would give relief irrespective of the circumstances which existed when the property was acquired. There would be no inequity in certain cases which would fall within the provisions of the Amendment, but it would not deal with the inequity which it appears could arise when a trader acquires property on a preceding year basis and disposes of it on the same basis. This has the result of his paying Schedule A tax for so many years and receiving a Schedule D deduction for so many years, less one. He would be the sort of person who, because of the abolition of Schedule A, would not be in a fair position having regard to what we are attempting to provide in the Bill.
Therefore, I would say that this is an Amendment which I am glad has been moved. This is a matter which had been exercising our attention before my hon. Friend raised it. It is a point which we are grateful to the Committee for bringing to our attention, because in a major change there are so many of these points and it is important that they should be seen and studied in Committee. I therefore give the assurance that the purpose of the Amendment will be carefully considered before the next stage of the Bill.

10.0 p.m.

Mr. Diamond: I do not think that we can leave matters as easily as all that, because more than one strand of thought has emerged in this short debate. The Amendment which the hon. Member for Nottingham, South (Mr. W. Clark) was so coy about explaining when he introduced it seeks to deal, judging from his speech, with two sets of circumstances only which, on a certain point of view and a certain approach might conceivably be held to be somewhat inequitable. The two circumstances are the curious circumstance of the increasing net annual value of Schedule A, so that one will have paid on a high figure and have a deduction on a low figure, and, secondly, the unusual circumstances of having acquired the property immediately before the assessment of Schedule A, and the property being acquired in a basis year and not in the year of assessment.
But these were two special cases, whereas there is a general misunderstanding about an alleged inequity under the Clause, to which misunderstanding the hon. Member for Twickenham (Mr.

Gresham Cooke) gave voice. He is right in saying that he has had representations. Many of us have had representations, and they have been based on the simple fallacy that because Schedule D assessments are based on the preceding year concept, and the basis of assessment is not the actual product but nevertheless the figure which the profits are deemed to be for the purpose of assessment, people confuse what a person has actually made in a previous year with the basis of assessment. Accountants will understand that the basis of assessment is something quite different from the actual profits of the year.
The Government have themselves, and themselves only, to blame for the general misunderstanding that has been caused in the business community by this Clause and a number of other Clauses, all of which misunderstandings they could have avoided if they had not been so obstinate and, if I may say with deference, pigheaded in their continual refusal to do something which would help everybody and cause themselves not one iota additional work.
I refer to the simple request made time and time again by my hon. Friend the Member for Sowerby (Mr. Houghton) and others of my hon. Friends that there should be some explanatory memorandum when we are doing something as complicated as this. I repeat "no iota of additional work" because we have been told with authority by a Government spokesman that such an explanatory memorandum exists, or is being prepared and will be circulated to everybody concerned to make clear what the provisions of the Schedule are. The whole machinery will stop unless this is done. Nobody outside the House of Commons, and precious few inside, know and understand the totality of these provisions with regard to Schedule A.
Why on earth, therefore, do the Government, when they go to the trouble of preparing an explanatory memorandum not let hon. Members have it? The Finance Bill is virtually the only Bill which is not prefaced by an Explanatory Memorandum. Any other Bill, and most are infinitely simplier than the Finance Bill, has an Explanatory Memorandum. The Memorandum is not the law but it is an indication of what is intended. Here, where we have these complicated


provisions, the Government dig their own grave as hard as they can. I should be the last person to object to their doing so, were it not for my concern that there should be the best possible relationship between the tax gatherer and the taxpayer, which is not established by refusing to let us have an explanatory memorandum. I have made my point, and do not wish to underline it further. It has its effect with regard to the misunderstanding on this Clause, and many of us have had the same kind of complaint as that voiced by the hon. Member for Twickenham.
I was not absolutely clear from the Solicitor-General's comments what was in the Government's mind. What I am absolutely clear about is, if I may say so with deference to the Financial Secretary that what he said during the Second Reading debate was, curiously enough, utterly and precisely correct. He said of Clause 24:
Subsection (1) provides that from 1963-64 onwards the annual value of owner-occupied business property shall not be allowed as a deduction in computing profits. The reason is that there will be no actual outgoing and that deduction will no longer be balanced by a Schedule A assessment." — [OFFICIAL REPORT, 6th May, 1963; Vol. 677, c. 46]
That is absolutely right. Just because we are to pay for a number of years Schedule A tax as compared with Schedule D, it does not at all affect the situation.
What has happened up to now is that one calculates one's Schedule D profits and, because one will pay part under Schedule A, it is right that that part should be deducted from the part under Schedule D. One pays one's total amount of tax on total profits—partly under one Schedule and partly under the other—the totality being the tax on the total profits one has made. Nothing could be fairer or more just than that, or more simple, but because we stop one of these we have to stop deducting that one from the total. If we are no longer taxed under Schedule A, we can no longer deduct tax under Schedule A from Schedule D, because one has not paid any under Schedule A. We must make that clearly understood.
What has happened is that because Schedule D is based on a year previous to a year of assessment, and because,

therefore, Schedule D tax in a year after Schedule A has ceased may be based on the profits of a year during which Schedule A was paid, a very natural confusion arises. Unless the Government explains this in an Explanatory Memorandum, it creates a lot of misunderstanding, a lot of friction, a lot of difficulty for inspectors of taxes—whom I should have thought the Government would wish to help, and not to hinder—and a lot of difficulty for accountants, who try to help in the collection of tax —reasonably; not too much, but a proper amount. I am sorry to underline this so much at this stage, but neglect of this sort is something against the interests of the Revenue and against the interests of the Government, and it causes quite unnecessary trouble for all of us. It would not have arisen now had not the Government been as obstinate as they have been in refusing to get us an Explanatory Memorandum.
I recognise that in the curiously limited cases where we have Schedule A with the net annual value rising considerably between the basis of assessment and an actual year there seems to be the possibility of an inequity—and in the other very limited case—but they are two very limited cases, indeed, and we should want to look very carefully at the Amendments the Government say they may wish to introduce in order to see that there is complete equity that is to say, that a business taking account of the total tax paid under Schedule A and Schedule D over the whole of the life of the business—the whole of it, not only the last two years but over the whole of the life of the business—was paying neither more nor less than it would have paid but for this particular change. It is often the practice to make the case by looking purely at the current year when one is switching from one basis to another. In order to see whether there has been complete equity, one has to go back to the start.
I know what the Amendment seeks to do. I am unable to say whether it will achieve its object. The Solicitor-General thinks that it will not. He is not sure whether the Government know what they want to achieve. We shall look very carefully at what the Government produce when it is produced.

The Solicitor-General: The Government know what they want to achieve: they want to achieve equity. I think that the points raised by my hon. Friend the Member for Nottingham, South indicate that there is a problem. and therefore I have given the undertaking that we will examine it.

Mr. W. Clark: In view of what my hon. and learned Friend has said, I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Question proposed, That the Clause stand part of the Bill.

Mr. McMaster: I should like to follow up the last remark of my hon. and learned Friend the Solicitor-General that the Government's aim is to achieve equity. I should like to raise a small point which arises from the Amendment which some of us tabled but which has not been selected relating to the word "occupied" in line 33 of subsection (3). I should like the Government to consider before Report whether "occupied" equitably achieves the purpose of the Clause and whether it would be better to substitute the words "in use"
There are many premises which are owned, for instance, by breweries or petrol companies on which a premium has been paid but which are not occupied by the person who paid the premium. Therefore, in such cases, the person who occupies the premises and uses them for the purposes of trade will not qualify for the benefit which is restricted by the use of the word "occupied" in subsection (3). Therefore, on the ground of equity, I should like my hon. and learned Friend the Solicitor-General to consider whether this word is reasonable.

The Solicitor-General: I will certainly look at the point which my hon. Friend has made. There certainly seems to be a case, in a limited sense and in a limited field for closer examination. I will examine this point when I examine the other points on the Clause which I have undertaken to examine.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 30 ordered to stand part of the Bill.

Orders of the Day — Clause 31.—(DEDUCTIONS IN RESPECT OF TITHE REDEMPTION ANNUITIES.)

Question proposed, That the Clause stand part of the Bill.

Mr. Mitchison: What is the Clause about, and why only five-sixths?

Mr. du Cann: I was hoping that the hon. and learned Member for Kettering (Mr. Mitchison) would ask that question, because I am extremely interested in this subject. I remember so well going to a dinner at which Lord Monckton was the principal guest. This was at the time when he was at the Ministry of Labour. He had spent the whole day in conference and had his most excellent expert Civil Service advisers at his side. Every time that he felt like speaking, they pulled his sleeve and said, "I do not think I would intervene just now if I were you, Minister". He said, Coming to this dinner and having the opportunity to speak is something that I have been looking forward to all day".
10.15 p.m.
I would not go quite as far as that, but I am asked "Why five-sixths?" I should be happy, if the Committee wishes, even at this late hour, to retail the long history of tithes. That I will not do. I simply say that Clause 31 preserves the right of an owner-occupier of land charged with a tithe redemption annuity to relief from tax on five-sixths of the annuity.
I am asked why. It was the amount originally fixed by Section 13 of the Tithe Act, 1936, as a conventional measure of the interest element in the annuity. Unless a general figure of that sort were chosen, obviously there would have to be a large number of specific calculations year by year. It was thought convenient at that time to take a single figure of that sort. The process is being continued in the Clause.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Orders of the Day — Clause 32.—(INTERPRETATION OF CHAPTER II.)

Question proposed, That the Clause stand part of the Bill.

Mr. Mitchison: Again, I want to ask only a short and simple question. What


is the sinister meaning of the last two lines of the page, which run like this:
assignment', in relation to Scotland, means an assignation"?

The Solicitor-General: Although not a Scottish lawyer, I think there is nothing sinister in an assignation. Subsection (1) simply makes two Scottish adaptations. It defines "lease", "premium" and "unit of assessment". This last is an expression used in the transitional provisions for 1963–64 in Clauses 20 and 21. It applies the definition of "connected person" contained in paragraph 20 of the Ninth Schedule.
As to the two lines about which the hon. and learned Member has asked me, I will have to write to him when I have had advice from the Lord Advocate and I will be able to tell him exactly what that means.

Mr. Mitchison: I trust that these adaptations will not be too promiscuous.

Mr. Warbey: I rise to speak on the Clause only to call attention to the fact, which is indicated by the rubric, that this is the end of a Chapter. It is the end of Chapter II of Part II of the Bill. I should have thought that this would be a convenient moment at which the Government would be able to indicate to the Committee their intention with regard to the—

The Chairman: Order. The hon. Member is taking upon himself to move to report Progress. I am accepting no such Motion.

Mr. Warbey: If I am not allowed briefly to make the point I sought to make, Sir William, I give notice that if after the passing of the Clause the Government do not move to report Progress, I shall ask your leave to move a Motion to that effect.

The Chairman: The hon. Member should confine his remarks to dealing with the Clause.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Mr. Houghton: I beg to move,
That the Chairman do report Progress and ask leave to sit again.

I move this Motion in order to inquire from the Chief Secretary his desires regarding further progress of the Bill tonight. As my hon. Friend has just said, we have reached the end of Chapter II. Chapter III opens up an important new field of debate. It would be a good thing if the Committee could come fresh to it on another day.
We have made very good progress, although, to be quite fair, I might say that earlier on in the evening, when it looked as if we might reach the end of Chapter II rather earlier, I said that my right hon. and hon. Friends would be prepared to move into Chapter But it is now twenty minutes past ten. Many of us were here until One o'clock this morning on this Bill, and I am sure that the Chief Secretary and the Patronage Secretary will realise that three days on the Finance Bill is a pretty hard stint, especially for those of us who have had to sit it through. I make no reflection on anyone who has not sat it through, but for those who have it is more arduous still.
So the right hon. Gentleman may feel that this is a suitable moment at which to leave the Bill until next Tuesday. That would meet our wishes. Perhaps he would consider it. I think we are all feeling a little jaded. Investment allowances are an important matter and may begin a rather long debate on the central economic feature of the Bill.
We have got along in a spirit of co-operation so far. We were all put out yesterday in our programme by the intervention of the Adjournment debate. We not only came back at Ten o'clock but made very good progress until One o'clock, many of us tearing up most eloquent speeches on various Amendments. We even restrained my hon. Friends from going through the Lobby four time in succession. We confined them to two divisions in succession. They all went away full of frustration and discontent. But that is the sort of thing we have to put up with. I ask the right hon. Gentleman now not to make my job—and after all I share with him a responsibility to a greater power—any more difficult than it is.

Mr. Boyd-Carpenter: The last words of the hon. Gentleman have touched


me to the heart. The idea of making his task more difficult than the weakness of the case he so often has to advocate inevitably makes this Motion so appealing that all I can do is advise the Committee that, in the circumstances, we should accept it.

Question put an agreed to.

Committee report Progress; to sit again Tomorrow.

Orders of the Day — ESTIMATES

Mr. Robert Carr discharged from the Estimates Committee; Mr. John M. Temple added.—[Mr. Fraser.]

Orders of the Day — ADJOURNMENT

Resolved, That this House do now adjourn.—[Mr. Fraser.]

Adjourned accordingly at twenty-five minutes past Ten o'clock.